Is ZEEKR IPO hitting the brakes?

ZEEKR, which was on the verge of a high-profile IPO, suddenly hit the "pause" button.

On November 30th, multiple sources close to ZEEKR revealed that due to weak market sentiment and mismatched valuation expectations, ZEEKR has decided to postpone its IPO plan. In response, ZEEKR stated that the company has publicly submitted its prospectus to the U.S. Securities and Exchange Commission, and all preparations are proceeding in an orderly manner.

However, from the updated prospectus on November 25th, key data such as the offering price range and size have yet to be disclosed, indicating ZEEKR's hesitation and hesitation in pricing the IPO.

In fact, signs that its valuation fell short of expectations had already emerged.

As early as the end of August, ZEEKR began contacting investment institutions in Singapore, Hong Kong, Europe, and other regions, conducting roadshows and collecting feedback from investors. At that time, ZEEKR planned to raise $1 billion through the IPO and aimed for a valuation of $18 billion (approximately RMB 13 billion). However, according to feedback from industry insiders at the time, this valuation was higher than expected, and there may be room for downward adjustment in ZEEKR's offer.

Nevertheless, ZEEKR still submitted its prospectus in November. Unexpectedly, overseas investors are more conservative in their predictions of new energy vehicle products and prospects, which led to the postponement of ZEEKR's IPO.

Market participants believe that it will be difficult for ZEEKR to achieve a valuation of $13 billion, and the final amount raised may be $500 million.

ZEEKR has not commented on this matter.

In response, an international investment banker who manages IPO projects pointed out that some car companies see that the market window has opened and will try to go public. However, investors' expectations for the capital market in 2024 are still relatively conservative, unless there are unique advantages in technology, such as intelligent driving, they are unwilling to give a high valuation.

Another international investment banker revealed to Wall Street News that the IPO market is still relatively tepid, and the bank has not received many deals for next year's listings. "Currently, for listings at this stage, investors are giving lower valuations."

In fact, as the penetration rate of domestic new energy vehicles quickly surpasses the 35% mark, investors' imagination of the electric vehicle industry has been greatly reduced. The enthusiasm of the current capital market for new energy vehicle companies is gradually cooling down. In the current volatile market sentiment, it is not easy to tell the story of "the fastest IPO of a new force."

Previously, ZEEKR CEO An Conghui outlined the blueprint for the capital market, focusing on sales, profitability, and technological advancement. However, all three aspects pose significant challenges.

In March, An Conghui stated at Geely's earnings conference that ZEEKR's sales target for this year is to double compared to the previous year, reaching 140,000 vehicles. However, with only one month left until the end of the year, ZEEKR still has 35,000 units of the "progress bar" to complete. In an interview at the end of September, ZEEKR Vice President Lin Jinwen candidly admitted to Wall Street News that the team is currently under a lot of pressure, but the core goal of 140,000 units this year is still in place, and the target of 650,000 units by 2025 has not been abandoned.

While the "scale KPI" is under pressure, ZEEKR has also failed to escape the situation of increasing revenue without increasing profit.

According to the updated prospectus, ZEEKR's net loss in the first three quarters of this year was 5.228 billion yuan, continuing to expand from 4.904 billion yuan in the same period. The total loss for 2021 is recorded at 17.4 billion yuan. As a subsidiary of Geely, ZEEKR's financial pressure has also been transmitted to Geely Automobile's financial report, dragging down its overall performance.

Previously, An Conghui stated that "ZEEKR is definitely the new energy vehicle company that can make money earliest and fastest after Tesla." However, in order to increase sales volume, ZEEKR significantly reduced the prices of its main models, 001 and ZEEKR X, at the end of the year. The price of the newly released ZEEKR sedan 007 at the Guangzhou Auto Show in early November also dropped to a low of just over 200,000 yuan for the first time.

From this perspective, ZEEKR's profitability task may still be a long way off.

In addition, ZEEKR has chosen to enter the US capital market with a technology label. However, ZEEKR still adopts a cooperative model with suppliers in key areas such as intelligent driving and intelligent cabin. For example, ZEEKR's own ZNP intelligent driving system uses the solution provided by Mobileye.

This has also put pressure on its valuation. Especially when Huawei split its core assets of the Automotive BU and threw an olive branch to the industry, stirring up the waters of intelligence, investors' expectations have been further raised.

In the ever-changing and rapidly evolving new energy market, if ZEEKR wants to truly become the vanguard in Li Shufu's mind and "create another Geely" in terms of market value, it must come up with popular products that are truly welcomed by the market and scale up.

In the fierce competition, it is difficult to form economies of scale and profitability is even more distant if one sticks to the high-end market. Therefore, An Conghui once again chose the field of sedans that he is most familiar with and made a move to turn the tide. On November 17th, with the launch of the ZEEKR 007 starting at 229,900 yuan, Vice President Zhu Ling bluntly stated that ZEEKR is now turning to enter the mainstream market.

In addition, ZEEKR is also accelerating its efforts to enhance its technological appeal. The self-developed intelligent driving system will be used in the ZEEKR 007. Vice President Jiang Jun revealed to Wall Street News that next year, there will be the introduction of a large-scale model, decision-making engine, and visual engine in the intelligent cabin.

However, for ZEEKR, which aims to become the "fastest to market" new force, the road ahead is still full of difficulties and challenges.