It is reported that Tianqi Lithium’s IPO will raise 1 billion to 1.5 billion US dollars, or it will be officially listed on the main board in July, which is expected to become the largest IPO of Hong Kong stocks this year. At the same time, the company will also become the second “A+H” dual-listed lithium giant in China after Ganfeng Lithium.
The predecessor of Tianqi Lithium Industry was a county-owned state-owned enterprise on the verge of bankruptcy – Shehong County Lithium Salt Factory. After the founder Jiang Weiping took over, the company gradually turned losses into profits and was listed on the Shenzhen Stock Exchange in 2010. Since then, Jiang Weiping, who is adventurous and has a vicious vision, has made Tianqi Lithium Industry become China’s lithium king and a global lithium mining giant through two “snake swallowing elephant” cross-border mergers and acquisitions.
According to the Wood Mackenzie Report, Tianqi Lithium is the world’s largest lithium mine producer in terms of production in 2020; Tianqi Lithium ranks third in terms of revenue generated by lithium in 2020.
However, the high-leverage mergers and acquisitions also caused Tianqi Lithium to owe huge debts and brought huge financial costs. In addition, the low price of lithium mines from 2019 to 2020 caused Tianqi Lithium to lose money continuously and be issued non-standard products. Audit opinion, the capital chain was very tight for a time. The company was not able to breathe a sigh of relief until the introduction of an Australian strategic investor in late 2020.
As the saying goes, time is also fortunate. In the blink of an eye, in 2021, the outbreak of the new energy vehicle market has rescued Tianqi Lithium. With the improvement of the lithium ore market and the sharp increase in prices, the company’s performance has reversed, the debt ratio has dropped, and the stock price has hit new highs, nearly doubling in the past two months.
Lithium is known as “white oil” and is one of the most critical raw materials for the manufacture of lithium batteries. Benefiting from the hot sales of new energy vehicles and the vigorous development of the energy storage industry, lithium prices have risen nearly 10 times since the beginning of 2021. In the first quarter of this year, the growth rate of net profit attributable to the parent company of many lithium mining companies was as high as 5 times or even 10 times.
But this is not good news for downstream car companies and battery companies. Under the cost pressure brought about by rising raw material prices, more and more new energy vehicle companies have begun to directly invest in lithium mining companies, or sign long supply orders with battery suppliers, intending to seize the right to speak in the industry chain. In fact, as a lithium giant with a market value of nearly 170 billion yuan in the A-share market, Tianqi Lithium has had a tight capital chain due to huge mergers and acquisitions in the “snake swallowing elephant” style in recent years. Judging from the investment direction of its fundraising, one of the purposes of Tianqi Lithium’s IPO is to relieve the company’s huge debt pressure.
Repaying Debt from Fundraising in Hong Kong
In fact, as a lithium giant with a market value of nearly 170 billion yuan in the A-share market, Tianqi Lithium has had a tight capital chain due to huge mergers and acquisitions in the “snake swallowing elephant” style in recent years. Judging from the investment direction of its fundraising, one of the purposes of Tianqi Lithium’s IPO is to relieve the company’s huge debt pressure.
According to the prospectus previously submitted by the company, the raised funds are planned to be mainly used to repay the outstanding debts and related transaction costs of the loan owed by the acquisition of Chile Mineral Chemicals (SQM), to allocate funds for the construction of the first phase of the Anju Factory, and to supplement working capital.
As of June 10, 2022, the outstanding principal amount of SQM’s debt was $1.13 billion. Compared with the estimated fundraising amount, after paying off SQM’s debt, there is not much money left.
“The purpose of Tianqi Lithium’s listing in Hong Kong is very clear. It is to get rid of the historical debt burden. Due to the shortage of funds due to debt problems, the company’s production capacity expansion has not been smooth.” An investment banker told the Caijing reporter.
Tianqi Lithium’s large debt mainly stemmed from a highly leveraged merger in 2018.
On May 31, 2018, Tianqi Lithium announced that it planned to acquire 23.77% of the Class A shares of SQM at US$65 per share, with a total transaction value of US$4.066 billion. In the end, Tianqi Lithium completed the transaction in the form of cash acquisition, of which 3.5 billion US dollars (about 22.3 billion yuan) of acquisition funds were borrowed from domestic and overseas syndicated loans. At that time, Tianqi Lithium’s net assets were only 11.937 billion yuan.
Prior to this, the company also carried out a number of mergers and acquisitions. Among them, in 2013, the company also carried out a “snake swallow elephant” acquisition. At that time, the company preempted the US lithium giant Lockwood and acquired Australia’s Talison, which has the world’s largest spodumene mine, for 5 billion yuan. In that year, Tianqi Lithium’s operating income was only 415 million yuan, and its net assets were 865 million yuan.
The outside world has compared the two overseas acquisitions to a “big gamble”. In this regard, Jiang Weiping, chairman of Tianqi Lithium, once said in an interview: “Overseas acquisitions do not always happen when you are fully prepared, but just in this window period, when it is time to make a move. Get started.”
However, the “snake swallowing elephant”-style acquisition still brought huge debt pressure to the company. Under this circumstance, in August 2018, Tianqi Lithium Industry submitted an application for issuance and listing to the Hong Kong Stock Exchange. However, due to the fact that SQM’s production capacity gains had not been realized at that time and the global lithium ore price was sluggish, the company’s listing in Hong Kong was finally lost.
Since then, Tianqi Lithium has been carrying huge debts. In 2020, the company was once on the verge of life and death. In mid-November 2020, the company issued a notice that it was unable to pay the loan interest of 471 million yuan due to mergers and acquisitions. At the same time, US$1.884 billion of the merger and acquisition loans will expire at the end of November, accounting for 179.35% of the company’s latest audited net assets. . At that time, the company’s default was imminent. In the end, it temporarily turned the corner by indirectly selling 24.99% of Talison’s equity.
Today, benefiting from the high prosperity of the new energy market, Tianqi Lithium has also entered an upward cycle with the industry and has been able to open the door of the Hong Kong Stock Exchange again. Tianqi Lithium, which is expected to raise more than 1 billion US dollars, is undoubtedly equivalent to a “strengthening shot” in the Hong Kong stock IPO market.
In the first half of this year, the IPO market of Hong Kong stocks was extremely bleak, and the amount of financing dropped by 90%. According to a report released by Deloitte on June 22, there will be 24 new stocks in Hong Kong in the first half of 2022, raising about HK$17.8 billion. Compared with the 46 new stocks that raised HK$213 billion in the first half of 2021, the number of new stocks will drop by 48%, and the total amount of financing will shrink by 92%. %. In the first half of 2022, only one company in the Hong Kong market was listed on a large scale, while companies such as Shell and Weilai were introduced to the market (without issuing new shares), and the total amount of financing in Hong Kong stocks further shrunk.
According to Wind statistics, since the beginning of this year (as of June 22), a total of 22 new shares have been listed in the Hong Kong stock market. Among them, the company with the largest fund-raising scale is Jinli Permanent Magnet, whose fund-raising scale is 4.24 billion Hong Kong dollars.
Lithium mine welcomes the strongest outlet
Benefiting from the hot sales of new energy vehicles and the rapid development of energy storage, the market demand for lithium carbonate and lithium concentrate has risen sharply. Under the gap between supply and demand, since 2021, the prices of lithium carbonate and other products have risen sharply, and the advantages of lithium mining enterprises have become more and more prominent.
Wind data shows that the average price of battery-grade lithium carbonate has risen from about 50,000 yuan/ton at the end of 2020 to today’s 470,000 yuan/ton, and it once exceeded 500,000 yuan/ton in March this year. The industry generally expects lithium prices to remain high and volatile this year.
Lithium products are “rising in volume and price”, and lithium mining companies are naturally the biggest beneficiaries. In 2021, Tianqi Lithium Industry will be able to turn losses into profits with the soaring lithium prices, and realize a net profit of 2.1 billion yuan attributable to the parent. In the first quarter of this year, Tianqi Lithium achieved a revenue of 5.3 billion yuan, a year-on-year increase of 481%; a net profit of 3.3 billion yuan, a year-on-year increase of 14 times, which has exceeded the net profit of 2021.
In the context of the continuous high price of lithium, the lithium ore sector has experienced a round of rebound recently, and the share price of Tianqi Lithium has also rebounded from the range low of 59 yuan/share on April 26 to the latest closing price of 119 yuan/share on June 23. The stock, which has nearly doubled in price, has recovered to the level at the end of November 2021, less than 15% from its all-time high.
In the context of rising performance and stock prices, many lithium mines and battery companies have taken advantage of the theme to increase financing to “fill blood”, and no one wants to miss this good opportunity to expand their investment territory. The lithium battery sector has set off a wave of refinancing.
Wind data shows that since 2021, the lithium mine and lithium battery sectors have completed more than 100 billion additional financing, and more than 100 billion are on the way. Specifically, in 2021, 19 companies will raise funds of 49.9 billion yuan; from 2022 so far, 6 companies have raised funds of 54.4 billion yuan. From the perspective of fundraising projects, most of the fixed increase investment is directed to capacity expansion projects.
Among them, Ningde Times (300750.SZ) alone has a fixed increase of 45 billion yuan. On June 22, CATL disclosed the results of the fixed increase. The issue price was 410 yuan per share. A total of 22 institutional investors were allocated, including Morgan Stanley, JPMorgan Chase, Guotai Junan Securities, Taikang Assets, Ruiyuan Fund, Hillhouse and many well-known institutions at home and abroad.
In addition, eight companies including Guoxuan Hi-Tech (300207.SZ), Xinwangda (300207.SZ), and Huayou Cobalt (603799.SH) completed a fixed increase of over 3 billion yuan.
At the same time, there are about 26 listed companies whose fixed increase plans are being processed, with a total planned fundraising of 102.7 billion yuan. Among them, the amount of funds to be raised by Enjie (002812.SZ) and Huayou Cobalt is over 10 billion yuan, and the 9 billion yuan fixed increase of Yiwei Lithium Energy (300014.SZ) is covered by the actual controller.
It is worth mentioning that many new energy vehicle companies have been found in the list of investors introduced by these lithium battery companies.
In the list of 19 investors introduced by Sunwoda, Weilai, Lili Auto, and Xiaopeng Motors are impressively listed. Shengli New Energy (002240.SZ) plans to introduce BYD (002594.SZ) as a strategic investor through fixed increase. After the issuance is completed, BYD’s shareholding is expected to exceed 5%.
There are rumors in the market that Tesla intends to participate in the subscription of Tianqi Lithium’s Hong Kong IPO. In response, Tianqi Lithium responded that “everything is subject to the company’s announcement”.
In April of this year, Tesla CEO Elon Musk expressed his intention to enter lithium mining. Musk said: “Lithium prices have gone up to crazy levels. Unless cost pressures ease, Tesla may have to go directly into the large-scale (lithium) mining and refining business.”
Under the favorable situation of new energy vehicles, the supply of power lithium batteries, which are the “heart” of new energy vehicles, has been weak, which will directly limit the production scale of new energy vehicles.
In order to stabilize the cost pressure brought about by rising lithium prices and stabilize the supply of raw materials, more and more OEMs and power battery manufacturers have begun to meddle in the upstream, signing cooperation agreements, investing in lithium mining companies, or simply going out to sweep the mines.
In May of this year, power battery manufacturer China Chuangxinhang and Tianqi Lithium Industry reached a strategic cooperation agreement and a lithium carbonate supply framework agreement; it is reported that BYD has found 6 lithium mines in Africa, and they have reached acquisition intentions; domestic Sichuan Province 54.29% equity of Snowway Mining in Yajiang County, inJingdongThe bankruptcy auction platform sold for 2 billion yuan, 597 times the starting price of 3.35 million yuan, setting a rare auction record in the industry.
The entire lithium resources market seems to have fallen into a frenzy, but is this boom rational? How long will it last?
Musk once mentioned, “The earth is not short of lithium, but the speed of mining and refining is very slow.” In the future, as more capital pours into the upstream lithium resource mining field, the mining progress of lithium mines will accelerate, and the supply of lithium will increase. It will also continue to increase, and lithium prices may cool down.
Written by Wang Ying and Yang Xiuhong Edited by Wang Lifeng and Lu Ling