CATL IPO: Wall Street is Ready to Do Anything to Get on the Train

The lack of recent multibillion-dollar deals has made the competition for a role in CATL’s listing in Hong Kong even more intense, despite low fees for bankers and the looming U.S. blacklist over the world’s largest battery manufacturer.

Top banking executives, such as HSBC Holdings Plc Chairman Mark Tucker, have made direct pitches to the Chinese company, whose full name is Contemporary Amperex Technology Co. Ltd., while other banks have delayed their work on other deals to focus on securing CATL, which is expected to raise over $5 billion in Hong Kong.

“When you have a prolonged drought in deals, it’s critical to be part of the first big deal,” said Craig Coban, a veteran investment banker who was one of the top executives in capital markets at Bank of America Corp. until his retirement in 2022. “This would be a must-win for any bank.”

Christmas and Lunar New Year holiday plans were abandoned by some bankers who were competing for a role in the deal and flocking to CATL’s headquarters in Nindé, Fujian province, where the company was founded in 2011. Decades earlier, in the late 1980s, Chinese President Xi Jinping was the local Communist Party leader. The Xinhua News Agency at that time described Nindé as a “backward mountainous prefecture.”

Today, Nindé is home to a global leader in battery manufacturing. According to Seoul-based SNE Research Inc., CATL supplies over one-third of the battery shipments for electric vehicles. With clients like Tesla Inc. and Volkswagen AG, CATL’s net profit for 2024 is estimated to be up to $7.3 billion.

Parts of this article are based on conversations with individuals involved in the negotiations, who requested anonymity to speak freely. The sale of CATL shares has been dubbed “Bright 8,” likely referencing the lucky number 8 in Chinese culture. The company submitted its listing application on February 11, stating that the funds will be used for expansion in Europe, particularly for building a battery factory in Debrecen, Hungary, which will serve clients such as BMW AG, Stellantis NV, and VW.

With over $5 billion, Bright 8 is likely to be the largest listing in Hong Kong since the initial public offering of Kuaishou Technology Co. in 2021, which will provide a significant boost to a market that is just now emerging from a slump.

IPO revenues in Hong Kong, including those of companies traded on the mainland that list shares in the city, fell to their lowest level in over two decades in 2023. They increased to $11.2 billion in 2024 but are still far from the ten-year annual average of about $30 billion before the COVID-19 pandemic, according to Bloomberg data.

CATL has been trading on the Shenzhen Stock Exchange since 2018. The company’s market value is $163 billion, with its shares rising more than 70% over the past 12 months.

It is not unusual for senior executives to participate in pitching offers for significant deals, but the extent to which bankers competed for mandates in CATL’s Hong Kong listing shows how challenging conditions have become after the decline in activity.

JPMorgan secured a role as a sponsor for CATL’s listing, whose chairman, Robin Zeng, attended a conference hosted by the American bank in Shanghai last year. Other participants in the deal include BofA, China International Capital Corp., CSC Financial Co., Goldman Sachs Group Inc., Morgan Stanley, and UBS Group AG. A representative of HSBC, which has not yet secured a role, declined to comment. CATL and JPMorgan also declined to comment for this article.

The auction for CATL—where banks compete for roles in the deal—took place on January 2. Days later, CATL was added to the U.S. Federal Register as one of the Chinese companies barred from supplying the U.S. military due to alleged links to the Chinese military industry, which CATL denies. While this U.S. move does not impose specific sanctions, it discourages American firms from interacting with companies on the list.

Nevertheless, banks raced to participate in the listing, agreeing to work for a base fee of just 0.2% of the deal size. Additionally, they could earn 0.6% from the issuer as a bonus and 1% from the brokerage fee paid by investors.

This is significantly lower than typical fees for so-called A-H deals, where companies that trade A-shares in mainland China list shares in Hong Kong as H-shares. The lack of deals has intensified the competition.

Banks often have to compete for fee shares by demonstrating who attracted the most large orders, according to Coban. “Chinese clients love to keep banks in uncertainty because they believe it makes them perform better,” he said.

Wall Street banks are likely to continue facing low fees this year, as much of the upcoming listings in Hong Kong will be A-H deals, which pay less than traditional IPOs. And with limited access to the domestic market for new issuances, Chinese banks are increasingly focusing their attention on Hong Kong.

The next stage for the CATL deal will see bankers leaving the mountains and tea plantations of Nindé to seek investors worldwide and secure long-awaited business opportunities.