IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/li-auto-inc" target="_blank" data-smartkarma-citation="entities:28812:1" rel="noopener">Li Auto Inc. (LI US)</a> is the first company to successfully commercialise EREVs (extended-range electric vehicles) in China, the Li ONE. Li ONE is a six-seat, large premium electric SUV which began volume production and deliveries in November 2019 and December 2019, respectively. In 2020, Li ONE was the best-selling new energy SUV in China with a sales volume market share of 9.7%, according to CIC. Li Auto has received approval for an HKEx secondary listing to raise $1.0-1.5 billion, according to press reports. The secondary listing comes on the back of a listing on Nasdaq in July 2020 ($1.0 billion net raise at $11.50 per ADS) as well as a follow-on offering in December 2020 ($1.4 billion gross raise at $29.00 per ADS). The secondary listing also follows peer, <a href="https://www.smartkarma.com/entities/xpeng-inc" target="_blank" data-smartkarma-citation="entities:29217:1" rel="noopener">Xpeng (XPEV US)</a>, which raised net proceeds of $1.8 billion on 7 July. <a href="https://www.smartkarma.com/entities/xpeng-inc-4cc65854-d10c-4d20-bf7e-ca0e016715ff" target="_blank" data-smartkarma-citation="entities:33772:1" rel="noopener">XPeng (9868 HK)</a> H-shares are trading -9% below the offer price largely due to the recent regulatory onslaught which has engulfed Chinese companies with exposure to the technology and education sector along with listing in the US. <div class="content-highlight">Despite rising competition from new entrants, Li Auto is delivering on its IPO promise by maintaining a market-leading share in its niche, investing in a roadmap to reduce its single model reliance, a positive gross margin and cash generation trajectory. On balance, for investors willing to brave the current regulatory-driven weak sentiment on Chinese names, Li Auto’s fundamentals and valuation are attractive, in our view. </div>

Li Auto Inc. (LI US) is the first company to successfully commercialise EREVs (extended-range electric vehicles) in China, the Li ONE. Li ONE is a six-seat, large premium electric SUV which began volume production and deliveries in November 2019 and December 2019, respectively. In 2020, Li ONE was the best-selling new energy SUV in China with a sales volume market share of 9.7%, according to CIC. Li Auto has received approval for an HKEx secondary listing to raise $1.0-1.5 billion, according to press reports. The secondary listing comes on the back of a listing on Nasdaq in July 2020 ($1.0 billion net raise at $11.50 per ADS) as well as a follow-on offering in December 2020 ($1.4 billion gross raise at $29.00 per ADS). The secondary listing also follows peer, Xpeng (XPEV US), which raised net proceeds of $1.8 billion on 7 July. XPeng (9868 HK) H-shares are trading -9% below the offer price largely due to the recent regulatory onslaught which has engulfed Chinese companies with exposure to the technology and education sector along with listing in the US. Despite rising competition from new entrants, Li Auto is delivering on its IPO promise by maintaining a market-leading share in its niche, investing in a roadmap to reduce its single model reliance, a positive gross margin and cash generation trajectory. On balance, for investors willing to brave the current regulatory-driven weak sentiment on Chinese names, Li Auto’s fundamentals and valuation are attractive, in our view. 

Consumer Discretionary / Industrials

Henry Kwon

Equity Bottom-Up

TSP has underperformed NASDAQ by 24.15% since June 30, while other Autonomous Driving Truck themed SPACs HCIC (merger announced with Plus AI) and NGAB (merger announced with Embark Trucks) have underperformed the Index by 1.86 and 1.87%, respectively in the same period. While we would not expect SPACs to begin reflecting the market's sentiment until official shareholder approval is obtained for SPAC mergers, both TSLA and NKLA have not shown similar degrees of underperformance with TSP since the DIDI oversight announcement took place last week, so the degree of TSP's underperformance aligns much more closely with those of NIO and XPEV.To be sure, TSP does have a VIE structure for its China business and that is what we think the market has just noticed in the past week as it ponders the long term implications of the current government oversight issues faced by overseas-listed Chinese stocks (U.S. companies conducting business in China tend to do so via either VIEs or JVs due to regulatory bars). This clearly is not good for TSP's current narrative in the market, but actually TSP is an American company, incorporated and headquartered in the U.S. (Not Cayman Islands) with the U.S. trucking market being its core center of value creation, which should be an overwhelming note of thematic positive at this point in time.In our view, TSP's narrative in the market has failed to maximize its positioning potential in the minds of U.S. investors since its April IPO. By highlighting its owned freight capacity and partnership with Navistar TSP merely highlighted structurally lower potential margins when compared to a pure SaaS provider with universal interface such as Embark Trucks. In the face of mounting concerns over rising Sino-American tensions, the stock was positioned as a China expansion play, while 71% of its owned fleet capacity is in the U.S. with a far bigger proportion of expected revenue growth coming from the U.S. in the foreseeable future, which is in fact what the Navistar partnership should signal to the market. While the trade-off is that TSP is (at least for now, anyways) a captive supplier to Navistar with the attendant margin implications, this implication is not as glaring on a casual glance through TSP's presentation materials and the issue normally should not come into play until at least scaling up is well under way.The short term trading implications for TSP's shares that we see are:<ul>
<li>
Bullish Short Term Scenario: TSP closed below its 50% Fibonacci Retracement level of $55.99 on Friday, at $55.01. If the shares can close above its 10-day EMA of $58.43, then $61.61 at the 38.2% Fibonacci Retracement level can come into play.</li>
<li>
Bearish Short Term Scenario: MACD is showing a bearish posture with RSI at 51.07, suggesting there could be further downside risk from current levels. 50-DMA sits at $45.84, below the 61.8% Fibonacci Retracement level of $50.36. These are likely to be the first support zones.</li>
</ul>Given TSP's short trading history, there are currently no set historical trading ranges, so we would use the Fibonacci retracement for loosely gauging where potential resistance/support zones could be at this point in time.

TSP has underperformed NASDAQ by 24.15% since June 30, while other Autonomous Driving Truck themed SPACs HCIC (merger announced with Plus AI) and NGAB (merger announced with Embark Trucks) have underperformed the Index by 1.86 and 1.87%, respectively in the same period. While we would not expect SPACs to begin reflecting the market's sentiment until official shareholder approval is obtained for SPAC mergers, both TSLA and NKLA have not shown similar degrees of underperformance with TSP since the DIDI oversight announcement took place last week, so the degree of TSP's underperformance aligns much more closely with those of NIO and XPEV.To be sure, TSP does have a VIE structure for its China business and that is what we think the market has just noticed in the past week as it ponders the long term implications of the current government oversight issues faced by overseas-listed Chinese stocks (U.S. companies conducting business in China tend to do so via either VIEs or JVs due to regulatory bars). This clearly is not good for TSP's current narrative in the market, but actually TSP is an American company, incorporated and headquartered in the U.S. (Not Cayman Islands) with the U.S. trucking market being its core center of value creation, which should be an overwhelming note of thematic positive at this point in time.In our view, TSP's narrative in the market has failed to maximize its positioning potential in the minds of U.S. investors since its April IPO. By highlighting its owned freight capacity and partnership with Navistar TSP merely highlighted structurally lower potential margins when compared to a pure SaaS provider with universal interface such as Embark Trucks. In the face of mounting concerns over rising Sino-American tensions, the stock was positioned as a China expansion play, while 71% of its owned fleet capacity is in the U.S. with a far bigger proportion of expected revenue growth coming from the U.S. in the foreseeable future, which is in fact what the Navistar partnership should signal to the market. While the trade-off is that TSP is (at least for now, anyways) a captive supplier to Navistar with the attendant margin implications, this implication is not as glaring on a casual glance through TSP's presentation materials and the issue normally should not come into play until at least scaling up is well under way.The short term trading implications for TSP's shares that we see are:

Bullish Short Term Scenario: TSP closed below its 50% Fibonacci Retracement level of $55.99 on Friday, at $55.01. If the shares can close above its 10-day EMA of $58.43, then $61.61 at the 38.2% Fibonacci Retracement level can come into play.

Bearish Short Term Scenario: MACD is showing a bearish posture with RSI at 51.07, suggesting there could be further downside risk from current levels. 50-DMA sits at $45.84, below the 61.8% Fibonacci Retracement level of $50.36. These are likely to be the first support zones.
Given TSP's short trading history, there are currently no set historical trading ranges, so we would use the Fibonacci retracement for loosely gauging where potential resistance/support zones could be at this point in time.

TSP: SaaS Provider or Trucker, American or Chinese? Identity Crises in the Making

<a href="https://www.smartkarma.com/entities/xpeng-inc" target="_blank" data-smartkarma-citation="entities:29217:1" rel="noopener">Xpeng (XPEV US)</a> is a leading BEV (battery electric passenger vehicle) company in China. XPeng current vehicle line-up consists of an SUV (the G3 which commenced deliveries in December 2018) and a four-door sports sedan (the P7 which commenced deliveries in May 2020). XPeng had a market share of 2.0% in the China NEV (new energy passenger vehicles) market and 4.7% in the mid- to high-end segment of the China NEV market in 2020, according to IHS Markit. XPeng has launched an HKEx secondary listing by offering 85 million new Class A ordinary shares. At the maximum offer price of HK$180.00 per share, the gross proceeds will be $2.0 billion. The secondary listing comes on the back of a listing on the NYSE in August 2020 ($1.4 billion net raise at $15.00 per ADS) as well as a follow-on offering in December 2020 ($2.5 billion gross raise at $45.00 per ADS).<div class="content-highlight">Despite rising competition, XPeng is delivering on its IPO promise by growing market share, enhancing the model line up and delivering a positive gross margin trajectory. XPeng is also further solidifying its brand recognition and leadership of full-stack in-house developed autonomous driving solutions. On balance, for investors seeking exposure to the China NEV sector, XPeng’s fundamentals and valuation are attractive, in our view. </div>

Xpeng (XPEV US) is a leading BEV (battery electric passenger vehicle) company in China. XPeng current vehicle line-up consists of an SUV (the G3 which commenced deliveries in December 2018) and a four-door sports sedan (the P7 which commenced deliveries in May 2020). XPeng had a market share of 2.0% in the China NEV (new energy passenger vehicles) market and 4.7% in the mid- to high-end segment of the China NEV market in 2020, according to IHS Markit. XPeng has launched an HKEx secondary listing by offering 85 million new Class A ordinary shares. At the maximum offer price of HK$180.00 per share, the gross proceeds will be $2.0 billion. The secondary listing comes on the back of a listing on the NYSE in August 2020 ($1.4 billion net raise at $15.00 per ADS) as well as a follow-on offering in December 2020 ($2.5 billion gross raise at $45.00 per ADS).Despite rising competition, XPeng is delivering on its IPO promise by growing market share, enhancing the model line up and delivering a positive gross margin trajectory. XPeng is also further solidifying its brand recognition and leadership of full-stack in-house developed autonomous driving solutions. On balance, for investors seeking exposure to the China NEV sector, XPeng’s fundamentals and valuation are attractive, in our view. 

Xpeng Secondary Listing: The Battle to Rule the Teslaverse

Semiconductors, Memory and SSDs Specialist, Objective Analysis

Jim Handy

Semiconductors, Memory and SSDs Specialist

Objective Analysis

Objective Analysis offers third-party independent market research and data for the semiconductor industry and investors in the semiconductor industry.

Semiconductors, Memory and SSDs

Thematic (Sector/Industry)

After Japan's earthquake automobile makers had a lot to worry about, since they were already faced with critical semiconductor shortages.  Now unusually bad weather has hit much of the US, and has stopped chip production in three important fabs in Austin, Texas.  This Insight explores the winners and losers in this series of events.

After Japan's earthquake automobile makers had a lot to worry about, since they were already faced with critical semiconductor shortages.  Now unusually bad weather has hit much of the US, and has stopped chip production in three important fabs in Austin, Texas.  This Insight explores the winners and losers in this series of events.

Texas Weather Deals Second Blow to Automotive Chip Supply Chain

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

With Tesla down 22.4% from its recent all-time high and as much 31.3% at the lows yesterday, and competition increasing with the high profile SPAC investment in Lucid, we believe it is time to seriously consider the short thesis again, for EVs overall, but Tesla in particular.

With Tesla down 22.4% from its recent all-time high and as much 31.3% at the lows yesterday, and competition increasing with the high profile SPAC investment in Lucid, we believe it is time to seriously consider the short thesis again, for EVs overall, but Tesla in particular.

Tesla – Threats from the Taycan and Lucid Air

United States

Nikola Corporation operates as a zero-emissions transportation and infrastructure solution provider. The Company is a designer and manufacturer of battery-electric and hydrogen-electric vehicles, electric vehicle drivetrains, vehicle components, energy storage systems, and hydrogen fueling station infrastructure.

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Nikola Corp (NKLA US)

Li Auto Secondary Listing: Volts Wagons

Li Auto has received approval for an HKEx secondary listing to raise $1.0-1.5 billion, according to press reports. Li Auto’s fundamentals and...

Arun George

TSP: SaaS Provider or Trucker, American or Chinese? Identity Crises in the Making

TSP is a U.S. domiciled American company, with the U.S. as its core value creation center. However, its China-centric narrative did not help as the...

Henry Kwon

Xpeng Secondary Listing: The Battle to Rule the Teslaverse

XPeng has launched an HKEx secondary listing to raise proceeds of $2 billion. For investors seeking exposure to the China NEV sector, XPeng’s...

Arun George

Texas Weather Deals Second Blow to Automotive Chip Supply Chain

A chip shortage is preventing the automotive industry from returning to full volume. Meanwhile Japan's earthquake and bad weather in Texas are...

Jim Handy

Tesla – Threats from the Taycan and Lucid Air

With Tesla down more than 20% from its recent highs, we examine the prospects for the EV bubble finally popping as competition intensifies just as...

Mio Kato

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