It is expected to go to Hong Kong to list Nezha Auto and 360 to respond to the “1 billion equity transfer”
A few days ago, Nezha Auto and 360 responded to reporters for the “1 billion equity transfer” and revealed their future cooperation plans. The picture shows that on the opening day of the Chongqing Auto Show on June 25, Zhou Jiang, Vice President of Nezha Automobile, introduced the Nezha S coupe to the audience.
Recently, 360 Safety Technology Co., Ltd. (hereinafter referred to as “360”) announced the transfer of 1 billion shares of Hezhong New Energy Automobile Co., Ltd. (hereinafter referred to as “Nezha Automobile”) at a fair price, triggering a series of associations in the industry.
In 2021, it was announced that it would invest 2.9 billion yuan in Nezha Auto, and it has actually invested 1.9 billion yuan in 360. During the rapid development of Nezha Auto, why would it put the brakes on its own investment behavior? Has the “honeymoon period” between 360 and Nezha Auto ended? All sorts of speculations abounded.
On the evening of June 26, 360 announced that the company invested a total of 2.9 billion yuan in Nezha Auto with its own funds, and the 900 million yuan capital contribution that should have been paid was completed on May 31, 2021. As of October 27, 2021, the first round of investment in the D1 round of 1 billion yuan was also paid by Tianjin Qirui Tiancheng Equity Investment Center (Limited Partnership), a wholly-owned subsidiary of 360. The company still has an unpaid investment of 1 billion yuan, which corresponds to 3.5320% equity of Nezha Auto. This part of the equity will be transferred to Jiaxing Xinzhu Equity Investment Partnership (Limited Partnership) and Shenzhen Jingcheng Open Enterprise Management Center (Limited Partnership). The transfer consideration is 0 yuan. After the transfer is completed, 360 still holds 11.4266% of Nezha Auto.
On the morning of June 27, Nezha Auto also officially issued an announcement, saying that the fund of part of the equity transferred by 360 will form a concerted action person with the management team, which will help improve the corporate governance structure and increase the control of the management team. The long-term sustainable operation of various automotive businesses is more beneficial.
The reporter called Zhang Yong, the co-founder and CEO of Nezha Auto, to ask about the impact of the equity transfer on Nezha Auto. He said: “Doing this can give the founders’ team the voting rights to run the business, and give us a greater say in the company’s operations.”
Zhou Hongyi, the founder, chairman and CEO of 360, also confirmed Zhang Yong’s statement. He said: “Nezha Auto is still a start-up company. The team has too little equity, and our purpose is to support and assist the team.”
“Although Nezha Auto did not increase the management’s shareholding ratio, it can also improve the control of the management team by acting in concert.” Associate Professor Xue Xu of Peking University School of Economics told reporters that the equity recipient company and the company’s management Forming a person acting in concert means that the equity recipient company will hand over the equity voting rights to the management team of Nezha Automobile, and the management team will vote on their behalf. The voting behavior of the equity recipient company is consistent with the voting behavior of Nezha Automobile, thereby expanding the management. The number of voting rights is a way of indirectly controlling the company.
It is worth noting that Nezha Automobile mentioned in the announcement that it is promoting the industrial and commercial change of this round of financing, and will quickly start the company’s shareholding system reform. Does this mean that Nezha Auto is not far from an IPO? Earlier, Northeast Securities disclosed that Nezha Auto plans to go to Hong Kong for an IPO this year. According to reporters and 360, Nezha and other relevant sources confirmed that this shareholding system reform is to prepare for the listing of Hong Kong stocks.
It is understood that three new car-making forces, Weilai, Xiaopeng and Ideal, have successfully listed on the Hong Kong stock market. Before Nezha, Leapmotor and Weimar also reported that they were planning to go to Hong Kong for an IPO.
According to public information, NIO, Xpeng and Ideal, which were previously listed on the US stock market, except that Wei Lai used a secondary listing method to log in to the Hong Kong stock market and determined the issue price of the Hong Kong stock market based on the discount of the US stock price. Large dual listing method, that is, both capital markets are the main listing places, and the stock price performance is relatively independent. At present, the capital market still favors “Wei Xiaoli”.
In contrast, Nezha, Leapmotor and Weimar, which are planning to go public for the first time, have attracted more attention. Among them, Leapmotor and Weimar have submitted prospectuses to the Hong Kong Stock Exchange, and with the rapid start of the joint-stock system reform of Nezha Automobile, its listing will also be put on the agenda.
It is worth mentioning that, among these three companies, Nezha and Leaphorse have followed “Wei Xiaoli” in sales, with the exception of Weimar, which has not yet entered the first echelon in terms of sales. In addition, compared with “Wei Xiaoli” who already have listing experience, they have more urgent financing needs and are more looking forward to expanding their international influence through listing in Hong Kong.
So, why did 360 transfer 1 billion yuan of equity at this “juncture”? Are you not optimistic about the prospect of Nezha Auto after its listing, or are you aware of the “high investment and high risk” of the new energy vehicle industry and want to “resign despite difficulties”?
A 360 insider told reporters that new energy and intelligent networked vehicles are sunrise industries, and the stock prices of new car manufacturers that have already been listed have also hit record highs. The outside world knows that 360’s investment in Nezha is “earned”. Although there are many speculations in the industry, 360 will continue to empower Nezha in the future, and the cooperation between the two parties will only be closer.
For example, he said that the two sides have “bloomed and fruited” in the fields of digital security and intelligent driving safety technology. “360’s automotive safety brain has begun to be installed on Nezha’s products, and more innovative technologies will be launched one after another. Please look forward to it.”
The reporter learned that with the successive addition of strategic partners such as 360, Ningde Times, and Huawei, the sales of Nezha cars also ushered in a stage of rapid growth.
According to the data of the Passenger Car Market Information Association, Nezha’s sales in 2020 will be 15,091 units, a year-on-year increase of 51%; in 2021, the sales will be 69,674 units, a year-on-year increase of 361.7%. From January to May this year, the cumulative sales volume of Nezha vehicles was 49,974, a year-on-year increase of 213%.
However, some people questioned that despite the high growth rate of Nezha car sales, the company is still in a state of loss. According to the announcement issued by 360, as of December 31, 2021, Nezha Auto had total assets of 13.7 billion yuan, total liabilities of 8.3 billion yuan, and net assets of 5.36 billion yuan; in 2021, Nezha Auto’s revenue was 5.73 billion yuan, with a net loss 2.9 billion yuan, with a net loss of 3.05 billion yuan after deducting non-deductible items.
Why did 360 announce the loss of Nezha Auto in the announcement? Lawyer Mu from Taizhou, Zhejiang told reporters that the transferor needs to inform the transferee of the company’s existing assets and liabilities. “If the transferor conceals the company’s debts, it will inevitably increase the value of the company’s existing assets, make the transfer price deviate from the actual price of the company’s equity, and infringe on the interests of the transferee. Therefore, the transferor has the responsibility to assure the transferee that the company has no undisclosed debts. This obligation exists regardless of whether it is stipulated in the assignment contract or not, and it is a legal obligation.”
Zhang Yong told reporters: “The auto industry is an economy of scale, and it needs a certain production scale to support it. Only after the scale is formed can it turn losses into profits. The loss is mainly because the company has done a lot in technology development, product research and development, factory investment and production and operation. Big investment.”
“In terms of supply chain and production capacity, Nezha Auto is doing hard work. In the future, we will adjust the sales structure, increase the sales share of products with high gross profit margins, and increase the annual sales scale to 200,000-300,000 vehicles.” Zhang Yong added that at present, the order volume of Ne Zha S, a mid-to-high-end product, is still good.
An industry insider told reporters that it is not necessary to measure the development prospects of new car-making forces by whether they are losing money. “The loss is not terrible, the terrible thing is the ‘hollowing of technology‘. Tesla lost 13 years before making a profit, but this does not prevent it from becoming the world‘s largest electric vehicle leader. For China’s new energy vehicle companies, research should be Whether they have technical autonomy or not, it may be more accurate to measure their value with new technology, new product R&D investment and actual application ratio.”
China Youth Daily and China Youth Daily trainee reporter Wang Zhiyuan Source: China Youth Daily