BYD stock sale raises 3.4 billion yuan to fund r&d
BYD Co., the Chinese automaker partially owned by Warren Buffett's Berkshire Hathaway Inc., raised 3.4 billion yuan ($550 million) in its biggest stock sale since its 2002 initial public offering.
The funds give Shenzhen-based BYD room to step up investments and bolster production of electric vehicles as governments worldwide step up efforts to fight pollution. Selling shares will also help alleviate the strain on a balance sheet saddled with surging debt.
The company will sell 121.9 million shares at .80 yuan ($4.51) each, BYD said in a Hong Kong exchange filing. That's 15 percent below their last price Friday before being halted from trading in Hong Kong and Shenzhen, pending the statement.
On Monday, BYD shares dropped 3.2 percent.
Pranab Kumar Sarmah, an analyst at AM Capital, wrote in a report in March that BYD would probably need to raise money from the capital markets because of the company's deteriorating financial health and rising spending needs.
Prior to the sale, BYD had gained 8.3 percent in Hong Kong trading this year, while the benchmark Hang Seng Index has fallen 1.5 percent. Shares of companies typically fall when they disclose large issuances of new stock because they dilute the value of existing shares.
The sale comes after BYD said that profit tumbled 89 percent in the first quarter because of declining demand for its gasoline-fueled vehicles. Last year, profit jumped almost sevenfold after billionaire founder and Chairman Wang Chuanfu, completed a three-year reorganization during which he cut the number of dealerships and narrowed losses at the solar business with the aid of state incentives.
Growing debt
The company has reason to raise funds via shares over bonds or loans. BYD's net debt, or interest-bearing borrowings minus cash and equivalents, climbed 34 percent to a record 20.3 billion yuan ($3.3 billion) at the end of last year. Dividing that by equity, which is how BYD calculates its key debt ratio for monitoring capital, the proportion of net debt rose to 94 percent from 71 percent a year earlier.
The offering would also be a revival of a plan that was shelved about a year ago, according to a person familiar with the matter. The company suspended plans to sell stock in 2013 after Bloomberg News reported on the share-sale plans, according to the person. At the time, BYD said that it wasn't "currently" planning to issue new shares. Bloomberg reported on the revival of the share sale on March 27.
The company will sell 121.9 million shares at .80 yuan ($4.51) each, BYD said in a Hong Kong exchange filing. That's 15 percent below their last price Friday before being halted from trading in Hong Kong and Shenzhen, pending the statement.
On Monday, BYD shares dropped 3.2 percent.
Pranab Kumar Sarmah, an analyst at AM Capital, wrote in a report in March that BYD would probably need to raise money from the capital markets because of the company's deteriorating financial health and rising spending needs.
Prior to the sale, BYD had gained 8.3 percent in Hong Kong trading this year, while the benchmark Hang Seng Index has fallen 1.5 percent. Shares of companies typically fall when they disclose large issuances of new stock because they dilute the value of existing shares.
The sale comes after BYD said that profit tumbled 89 percent in the first quarter because of declining demand for its gasoline-fueled vehicles. Last year, profit jumped almost sevenfold after billionaire founder and Chairman Wang Chuanfu, completed a three-year reorganization during which he cut the number of dealerships and narrowed losses at the solar business with the aid of state incentives.
Growing debt
The company has reason to raise funds via shares over bonds or loans. BYD's net debt, or interest-bearing borrowings minus cash and equivalents, climbed 34 percent to a record 20.3 billion yuan ($3.3 billion) at the end of last year. Dividing that by equity, which is how BYD calculates its key debt ratio for monitoring capital, the proportion of net debt rose to 94 percent from 71 percent a year earlier.
The offering would also be a revival of a plan that was shelved about a year ago, according to a person familiar with the matter. The company suspended plans to sell stock in 2013 after Bloomberg News reported on the share-sale plans, according to the person. At the time, BYD said that it wasn't "currently" planning to issue new shares. Bloomberg reported on the revival of the share sale on March 27.
