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Lygend, a Chinese Nickel Producer, is Seeking up to $593 Million in a Hong Kong IPO

Lygend Resources & Technology Co., a Chinese nickel producer and trader, is looking to raise up to $593 million in its Hong Kong initial public offering. This would make it the latest company along the electric-vehicle supply chain to tap public markets in what has been a lackluster year for debuts.

November 21, 2022
5 minutes
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Lygend Resources & Technology Co., a Chinese nickel producer and trader, is looking to raise up to $593 million in its Hong Kong initial public offering. This would make it the latest company along the electric-vehicle supply chain to tap public markets in what has been a lackluster year for debuts.

The company, based in Ningbo, China, said Monday that it is taking investor orders through Thursday, and that it expects to list on Dec. 1. According to Lygend, the offer price will be somewhere from HK$15.60—equivalent to $1.99—to HK$19.96 apiece. About 90% of the 232.5 million shares on offer will be available to international investors, the company added.

Electric-vehicle makers in Asia and the companies that supply them have increasingly turned to capital markets to raise money this year, despite the market volatility. They are taking advantage of a surge in demand for energy-efficient automobiles. These businesses tend to be capital-intensive, so they have little choice but to raise funds through capital markets.

Lygend is trying to expand its capacity to produce nickel-cobalt compounds used in EV batteries. It plans to use more than half of the proceeds from the IPO to develop and construct its production projects for nickel products on Indonesia’s Obi Island, which is nestled in the Maluku Islands, toward the country’s east. Lygend said it is also looking into potential minority investments in nickel mines in Indonesia.

EV-related businesses are looking to expand their operations in China, where the demand for automobiles is high. Lygend, which gets most of its revenue from customers in mainland China, will join other EV battery suppliers and producers who have gone public in Hong Kong this year. By increasing their presence in the Chinese market, these businesses hope to gain a larger share of the market.

Lygend still derives most of its trading and production revenue from the stainless-steel industry. However, the share of revenue generated from the EV industry jumped to 43% for the first half of 2022, from 3.7% in the comparable period a year ago. For the six months ended June 30, the company’s profit soared to 2.29 billion yuan—equivalent to $321.6 million—from 89 million yuan the year before. This was the result of a more than doubling of revenue to 9.98 billion yuan.

The company plans to use some of the money raised through its IPO to fund additional capital for Contemporary Brunp Lygend Co., its joint venture with Chinese battery giant Contemporary Amperex Technology Co. that focuses on the development of EV battery projects.

This year has seen a number of major events that have had a negative impact on global markets, including high inflation, rising interest rates and Russia's invasion of Ukraine. This has led to a significant decrease in the amount of money being raised through IPOs in Hong Kong, with Dealogic reporting that $11.1 billion has been raised so far this year, 71% less than the same period last year.

This year, Chinese state-owned entities have supported IPOs in Hong Kong by participating as so-called cornerstone investors. Five cornerstone investors, including a Chinese national fund and a state-owned enterprise under the Ningbo government, have agreed to buy HK$2.55 billion in Lygend shares and hold them for at least six months. At the low end of the pricing range, the cornerstone investments would comprise about 70% of shares on offer.

Investors have been cautious about participating in this year’s deals, and some companies have had to downsize their fundraising ambitions or accept lower valuations.

In September, Chinese EV maker Leapmotor raised $800 million in its IPO, far short of the $1.5 billion that the company had previously aimed for. However, despite the challenges, many companies have still been able to successfully raise capital.

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