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In case you missed it, we saw the year’s biggest IPO kick off last week in Hong Kong. Valued at A$7.10B, it’s only fitting that the biggest IPO of 2025 goes to the world’s biggest manufacturer of EV batteries: China’s CATL.
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Blockbuster IPOs, EV batteries – you’d be forgiven for thinking we’ve returned to 2021.
In that light, if one zooms out and considers the last few years, it’s perhaps surprising that we’re seeing CATL – a familiar name among commodity analysts during the lithium boom of the early 2020s – stage such a feat.
It comes after years of lithium price pressure, a litany of lithium projects going bust around the world, and a general cooling-off of the EV battery thematic made particularly chilly by the lapsing of key EV rebates across developed economies.
Yet, CATL managed to surge 16% on its debut day (though, has since lost momentum).
What meaning can we take from this?
The good news is that it’s a bullish signal for IPO markets generally, which still remain, in a word, unexciting. The big story there is of global economies’ hiking of interest rates in the post-COVID years.
I’ve said before that when a central bank raises interest rates, it’s basically a kind of economic chemotherapy – many other ‘bodily’ functions are affected. So it has been with Initial Public Offerings in an environment where it has been notoriously difficult to raise capital (unless you’re in the business of data centres).
But there’s another angle to CATL’s IPO – the fact that it happened in Hong Kong, and not on Wall Street.
Really, CATL’s Hong Kong IPO is itself the consequence of geopolitical macro.
From the company’s POV, it wouldn’t make much sense to list on Wall Street, seeing as U.S. officials (read: Trump) have been repeatedly talking about ejecting major Chinese companies from American indexes.
Last month, analysts predicted that the USA’s hostile stance towards large publicly listed Chinese companies could end up a boon for Hong Kong’s IPO market.
And after China’s last few years of economic strife – the country in 2024 stopped reporting youth unemployment – that’s probably a happy silver lining.
Especially seeing as at one point many trading companies were actually leaving Hong Kong over concerns ultimately boiling down to China’s increased authority over the jurisdiction across the last decade.
(Of course, CATL isn’t a Western company.)
But is the valuation rational?
But all of this ignores a bigger question – whether or not the CATL IPO, or more specifically, its valuation, is based on rationality.
Large IPOs will always attract the attention of the world’s investment banks, who all agree with each other on high valuations and thereby create that reality. That’s how you end up with situations like Guzman Y Gomez listing at $30/sh – a move which caused many to scratch their heads when it graced the bourse in 2024.
Some commentators have pondered whether CATL is simply overvalued – also worth noting is that retail investors swarmed into the stock, but that’s not particularly unusual. It may, though, explain the dissipation of excitement over the last five days visible on CATL’s share price chart (for its Hong Kong listing).
Then again, it’s inaccurate to think of CATL as a lithium battery company: It’s got far more than that going on.
CATL has a focus on next-gen batteries like those that use sodium; it enjoys major contracts with giants like LG; it supplies batteries to BMW, Volkswagen, and Tesla; and it has a decent presence in Europe, which could insulate it somewhat from geopolitical volatility.
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Time will tell. What is clear is that Hong Kong’s IPO market is far more interesting right now than that of the ASX.
Don’t even look at the upcoming floats webpage, it’s just depressing.
So, for Australians, the biggest question might be an even simpler one here: Whether or not CATL’s mid-2025 success inspires any surging confidence in the minds of others seeking to publicly list in Australia.
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