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Why Li Auto Stock Is Sinking Today

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

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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.

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Stocks Mentioned

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

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