AutoBeta(AutoBeta.net)05/29 Report--

Under the influence of the global market economy, the major multinational car companies in the world are extremely short of money and turn to banks for help. Geely, China's largest private car company, also seems to have made a move, issuing an announcement that it will allocate shares to ensure that the company has plenty of cash.

According to the announcement, Geely intends to sign an agreement with the placing agent to appoint the placing agent as the company's agent to urge the placing agent to subscribe for 600 million placing shares at the placing price of HK $10.8 per share. Geely is expected to earn about HK $6.447 billion.

Although the news of the placement of shares is both bad and good for Geely, because the placing shares account for about 6.51% of Geely's issued share capital and about 6.11% of the company's issued share capital after the shares have been expanded. After the completion of the placement, the shares held by Li Shufu and his partners will be diluted from 43.88% to 41.2%. To this end, the interests of existing shareholders will be slightly frustrated, resulting in a pessimistic reaction in the market.

By the close of trading at noon today, Geely's share price had also fallen 9.39%, making it the leading decline in the auto industry sector.

However, for Geely Motor at this time to choose a share placement, the industry analysis said that in order to ensure that the company has plenty of cash, and to help the parent company reduce financial pressure. Because since 2020, the national and even global automobile market has suffered a heavy setback, in which the Chinese market has experienced an one-month shutdown, which has greatly affected the rhythm of the whole industry. as the largest private car company in China, it is bound to be damaged to some extent.

Although Geely has shown obvious signs of recovery in April this year under the trend of a gradual recovery in the domestic market, Geely has achieved a double increase from the same month to 105468 vehicles, but according to its performance in the first four months, it is still in a large decline, with a decline of 311400 vehicles to-34%. There is no hope of achieving the annual target this year. According to the year-end sales target of 1.41 million, it is only 22% online.

New car sales that do not achieve growth will certainly not bring huge profits to be performed. according to previous financial reports, by the end of 2019, Geely's notes payable and current liabilities due within one year were as high as 48.5 billion yuan. The balance of cash and accounts receivable is only 45 billion yuan, coupled with a net profit of only 8.19 billion yuan in 2019, which shows that Geely's current liquidity is also a little tight. Perhaps this is one of the reasons Geely made the share placement move.

In addition, Geely has also put a lot of financial pressure on Geely through various acquisitions in recent years. In addition to the 49.9% stake in Proton Motors of Malaysia's heavy Industry Company and the 51% stake in luxury sports car brand Lotus and the 9.69% stake in Daimler Group acquired in the previous two years, Geely has been in a state of debt strain.

However, analysts also said that Geely after the rights issue is expected to have a cash flow of about 25 billion yuan, which, in the medium term, will help Geely and Volvo play a strong synergy in the proposed merger. At that time, it will help the company achieve a significant increase in sales, revenue and net profit, and is likely to be listed in many places after the merger to promote the company's performance and stock price.

According to Geely Motor's new round of integration plan with Volvo announced a few days ago, Geely is in preliminary discussions with Volvo, the two sides will explore through the business merger of the two companies, such as a successful merger, Geely Volvo will become the tenth largest automobile group in the world.

For the current global auto market, emergency money has become the norm of major multinational car companies, not only the BBA of luxury brands or Toyota and Volkswagen, which have the most outstanding profit performance, have all begun to make capital tightening and loan plans because of this epidemic, so the lack of money is no exception for Geely. After all, Geely needs countless places to spend money.

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