Ideal Car's Hong Kong stock has been declining all the way. Why was the additional issuance terminated ahead of schedule?

For Ideal Motors, today is not a good day. After opening with a decline in the Hong Kong stock market, the stock price has continued to fall, reaching a decrease of 4% and hitting the lowest level since June 30th.

Yesterday, after the market closed, Ideal Motors announced the termination of the ATM offering in the US stock market that was initiated last summer.

"The company has provided notice of termination of the equity distribution agreement entered into by the company and certain selling agents in relation to the ATM offering of the company's American Depositary Shares, effective immediately after the close of business on September 27, 2023 (Eastern Time)."

The so-called ATM offering refers to the issuance of additional shares by a listed company at the market price. In an ATM offering, the company gradually sells newly issued shares to the secondary market through designated brokers at the prevailing market price.

It is worth noting that in this round of offering, Ideal Motors sold a total of 13,502,429 American Depositary Shares, corresponding to 27,004,858 Class A ordinary shares. Before deducting sales agent commissions not exceeding $7 million and other issuance expenses, the total amount raised was $536 million. This is far from the planned fundraising target of $2 billion as announced at that time.

As for the reason for terminating the offering, Ideal Motors explained in the announcement: "The reason is that the company has no plans to raise additional funds or sell additional securities based on the ATM offering after it becomes effective. The company has not been penalized or held liable for the termination."

However, there are different interpretations within the industry. According to media reports citing a sales director, it is not easy for Chinese electric vehicle manufacturers to raise funds in the United States, especially in the midst of the EU's investigation into them. Therefore, the company may have had to take this measure. "Concerns about the company's need to explore other financing methods, such as debt or Hong Kong equity, have put pressure on its stock."

In addition, intense market competition has also led to a continuous decline in Ideal Motors' stock price recently, especially after the release of the M7 model jointly developed by Huawei and Silas, which has increased competition for Ideal Motors.