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Chinese banks are seeking to work on the popular secondary listing in Hong Kong of the world's leading electric vehicle battery maker CATL for a fee of up to 0.01 per cent, highlighting intense competition in a once lucrative listing market where business has slowed dramatically.
CICC and CSC are among the banks preparing to take a lead role in the deal, which would be one of the largest listings in Hong Kong in recent years. JPMorgan and Bank of America are also lined up to take on the senior roles.
CICC's offer to play a role in the deal suggests they would be willing to work on it for a fee of 0.01 percent of the capital raised, which could ultimately amount to $7 billion, two people familiar with the matter said. CSC also offered fees at about that level, two people familiar with the matter said.
“I think competitors in this market are willing to do things for next to nothing,” said a senior banker at one institution offering one of the roles.
Businesses typically use numbers from the many banks they offer as a guideline when deciding how to set fees, rather than paying them the amount you quote them directly. Total fees may be shared unevenly between banks.
CATL was planning to pay a 0.2 percent underwriting fee, two people familiar with the matter said. On top of that incentive fees — which depend in part on the value of orders placed by each bank — could make the final number higher, two people familiar with the deal said. Fees on larger deals, such as a CATL listing, can often be lower than fees charged on smaller deals, but figures of less than 1 percent are considered unusual.
Morgan Stanley estimated that CATL's listing could raise as much as $7.7 billion, marking one of the largest offerings in the region in recent years and giving the Shenzhen-listed company access to outside funds as it seeks to expand overseas. CATL announced its plans in December, and the listing is expected to take place later this year.
Bankers said Chinese banks were willing to accept very low fees for such a large offering, as there was little business and the IPO market had not yet rebounded on the mainland. One European bank manager, who participated in the bids, said it was not surprising to see aggressive bids “given that most of their local team in China has a lot of capacity, but no deal flow.”
US banks plan to work on the deal despite the Pentagon this month adding CATL – a supplier to Tesla, Volkswagen and Ford – To the blacklist For companies that say they are linked to the Chinese military.
Interest among some U.S. institutional investors in the allocation has not waned either, according to participating bankers. The Department of Defense's list only prohibits the persons named on the list from dealing with the US military and has no direct legal ramifications, but it does entail reputational risks.
Cattle The company said in a statement that it “has never been involved in any military-related business or activities,” and that the move was a “mistake” and “is not expected to have any significant adverse impact on our business.”
The battery leader halted an earlier plan to sell up to $5 billion of Swiss global depositary receipts in 2023 after regulatory concerns over large-scale offerings.
On average, banks will seek or receive at least single-digit fees for listing in Hong Kong, according to investment bankers and prospectuses filed with the exchange in 2024.
An executive at another bank, who asked to play a role, described CATL's listing as a “franchise-defining deal” and said bankers would want to participate despite the low fees.
Banks also have an incentive to participate in the deal in the hope of doing future business with CATL, such as block deals that may be more profitable.
“Everyone just wants to get credits at the league table, and they're not trying to make money on this deal,” said a senior Chinese banker familiar with the pitch. “It's very annoying to see some peers breaking the rules, but there's nothing we can do about it.”
Bank of America, JPMorgan, Goldman Sachs and CICC declined to comment. CSC and CATL did not respond to requests for comment.
