Financial Times article Lotus post-IPO drop

Peter Campbell in Hethel, Norfolk, and Edward White in Shanghai YESTERDAY

Two weeks after its shares began trading on the Nasdaq, Lotus Technology is down by two-thirds.

Yet far from being a surprise, the collapse has a familiar sensation for investors who bought into other businesses listed on global stock markets by China’s Geely. In recent years, the ambitious Chinese group has listed shares in Volvo Cars, Polestar and ECARX. All remain deeply under water.

The fall, if sustained, deals a hammer blow to one of China’s most ambitious auto groups, and raises questions over its future ability to tap public markets to raise funding as it pushes further into the expensive business of developing electric vehicles.

Shaun Rein, managing director of China Market Research Group, a Shanghai consultancy, said it was difficult to have a positive view of Geely’s outlook in the wake of the Lotus listing.

“They don’t have a strong strategy internationally or in China, they have too many overlapping brands that just don’t make sense,” he said.

The company burst on to the global stage with a 2010 deal to purchase Volvo Cars from Ford, kicking off a decade of expansion buying unloved international car brands including Lotus and taking stakes in Mercedes-Benz, Volvo trucks and Aston Martin.

Despite its dismal stock market record and increasing jitters about EV demand in western markets, the Chinese car group is doggedly pursuing public status for its other brands.

Geely has already filed documents for an IPO on Nasdaq for its new electric car brand Zeekr. At the same time it harbours stock market ambitions for a host of other businesses within its automotive portfolio, according to people familiar with its plans.

The share price performances of Volvo and EV brand Polestar already made it difficult to attract potential investors into Lotus, according to people familiar with the deal. Finding investors for Zeekr will be harder still if Lotus shares remain underwater for those who bought into the Spac.

The listings are more than just bragging rights for its ambitious founder Li Shufu, known internationally as Eric Li. As it grows outside of China, the company is having to jettison its historic reliance on domestic funding, and raise capital through western markets that are increasingly sceptical about Chinese businesses.

“They will need a lot of money,” admits one current director within the wider business.

More: https://www.ft.com/content/74713a22-f557-43d3-8952-645de8211ee7

 

[Porter]

An additional useful infographic on Geely's portfolio of brands:

 

[Porter]

Seems to be coming back up over the last 5 days, though!

 

[Nova]

I think it still comes down to producing a good product first. You don't have to make a profit so long as you maintain consistent and significant sales growth along with cost reduction momentum - which produces a realistic timeline for eventually being profitable. Tesla did this, which is why their stock prices boomed. I just don't believe Volve and Polestar has broad market appeal in the world that would justify optimistic stock prices.

The entire industry with the exception of Tesla and BYD, read the future of the EV market wrong. The high end EV market is saturated - there is no room for more models. 2 year old EQS are selling for nearly 1/2 off the original MSRP. Toyota is also wrong about this - there is demand for lower priced EV cars. The fueling and maintenance conveniences are very attractive to the average consumer.

 

[Nova]

Seems to be coming back up over the last 5 days, though!

View attachment 38687

I should have averaged down at 5.50? LOL

 

[Porter]

I think it still comes down to producing a good product first. You don't have to make a profit so long as you maintain consistent and significant sales growth along with cost reduction momentum - which produces a realistic timeline for eventually being profitable. Tesla did this, which is why their stock prices boomed. I just don't believe Volve and Polestar has broad market appeal in the world that would justify optimistic stock prices.

The entire industry with the exception of Tesla and BYD, read the future of the EV market wrong. The high end EV market is saturated - there is no room for more models. 2 year old EQS are selling for nearly 1/2 off the original MSRP. Toyota is also wrong about this - there is demand for lower priced EV cars. The fueling and maintenance conveniences are very attractive to the average consumer.

I agree 100%. It's like the Wall Street types convinced themselves that there was an unlimited quantity of Bitcoin Millionaires suddenly available as a new and perpetual market sector. It's simply not factual, and you're never going to have a significant growth model attached to ultra-luxury goods.

 

[EZcheezy]

An additional useful infographic on Geely's portfolio of brands:

View attachment 38685

oh they only own 23% of Lotus?

then why do I keep hearing things like Geely "bought" Lotus or Geely "owns" Lotus or comments worried about Lotus now being a Chinese brand.

am i missing something or was all of that just uninformed nonsense.

whos really in control of Lotus?

 

[benjh1028]

Crazy volatility today!

 

[Porter]

oh they only own 23% of Lotus?

then why do I keep hearing things like Geely "bought" Lotus or Geely "owns" Lotus or comments worried about Lotus now being a Chinese brand.

am i missing something or was all of that just uninformed nonsense.

whos really in control of Lotus?

That's an odd number, there are some games afoot. They were 51% owners of Lotus for quite some time, with the Malaysians (Etika Automotive) at 49%... it may be that they've divested a portion of private ownership as part of the IPO. I'm sure their stack of ownership assets still end up being a majority of some kind, but with less clarity than simple outright ownership as before. I'm quite interested in what may have happened with the Malaysian ownership stake.

From Wikipedia... definitely some horse trading going on with Etika.

This also doesn't address how much of the SPAC will still be held by L Catterton / LVMH. It's all gone a bit murky. I do find it quite interesting that 89.7% of the company is still effectively held privately, even though it's now a "publicly traded" entity.

 

[Julian73]

oh they only own 23% of Lotus?

then why do I keep hearing things like Geely "bought" Lotus or Geely "owns" Lotus or comments worried about Lotus now being a Chinese brand.

am i missing something or was all of that just uninformed nonsense.

whos really in control of Lotus?

Because the new issue of Lotus Technology is separate from Group Lotus (51 Geely/49 Erika) and the Lotus Cars holding. Yes they are divested some of their 51% holding in LT in the public offering and L Catterton (LVMH) holds a chunk. Some reports claim that Geely and these partners retained 89.7% ??? Welcome to the world of SPAC's, public disclosure is weak.

 

[wallstbear]

Because the new issue of Lotus Technology is separate from Group Lotus (51 Geely/49 Erika) and the Lotus Cars holding. Yes they are divested some of their 51% holding in LT in the public offering and L Catterton (LVMH) holds a chunk. Some reports claim that Geely and these partners retained 89.7% ??? Welcome to the world of SPAC's, public disclosure is weak.

According to their IPO prospectus:

"We estimate that, immediately after the Closing, assuming none of the holders of LCAA Class A Ordinary Shares (“LCAA Public Shareholders”) exercise their redemption rights, (i) the existing shareholders of LTC will own 78.07% of the issued and outstanding LTC Ordinary Shares, (ii) LCAA Public Shareholders will own 3.13% of the issued and outstanding LTC Ordinary Shares (represented by LTC ADSs), and (iii) LCA Acquisition Sponsor LP, a Cayman Islands exempted limited partnership (the “Sponsor”) and the independent directors of LCAA will collectively own 1.03% of the issued and outstanding LTC Ordinary Shares. .... it is expected that Mr. Shufu Li will beneficially own more than 50% of the total voting power of all issued and outstanding LTC Ordinary Shares immediately following the consummation of the Business Combination."

It's a rather convoluted holding structure. See attached chart.