Please ensure Javascript is enabled for purposes of website accessibility

Why Li Auto Stock Is Sinking Today

By John Rosevear - Apr 7, 2021 at 2:37PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A planned bond offering seems to have investors concerned.

What happened

Shares of Chinese new-energy vehicle maker Li Auto (LI -1.79%) were trading lower on Wednesday, after the company announced a $750 million debt offering.

As of 2:30 p.m. EST, Li's American depositary shares were down about 10% from Tuesday's closing price.

So what 

Li Auto said in a statement on Wednesday morning that it is aiming to raise $750 million via a new issue of convertible bonds. The bonds will mature on May 1, 2028, unless they're converted to Li Auto stock before then, or unless certain events -- including a "fundamental change" in the company or a significant change in China's tax laws -- oblige Li to redeem the bonds before that date. 

The offering's underwriters will have the option to purchase an additional $112.5 million worth of bonds. The interest rate that Li will pay, and the price at which the bonds will convert to stock, haven't yet been determined, the company said. 

Li said it will use the proceeds of the offering for research and development of new vehicle models, including battery-electric models, and for related technologies and other general corporate purposes.

A Li ONE, an electric SUV, parked in a mountain setting.

The Li ONE has found a market outside of China's major cities, where recharging stations are scarce, thanks to its ability to recharge via an on-board generator. Image source: Li Auto.

Li currently has just one model, the Li ONE SUV, which is an electric vehicle with a so-called "range extender," an on-board gasoline generator that allows it to function like a hybrid when recharging stations aren't available. 

Now what

Auto investors can expect to hear more about this offering sometime in the next few days, after the banks underwriting the offering set the interest and conversion rates after conferring with their clients.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Li Auto Inc. Stock Quote
Li Auto Inc.
$23.56 (-1.79%) $0.43

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/20/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.