[Business & Issues] CATL Raises 6 Trillion Won in Hong Kong... Why It Rejected U.S. Investment

Abandoning Nasdaq for Hong Kong Listing
Potential U.S. Sanctions... "Cooperation with Chinese Military"
All-Out Effort to Secure Sodium-Ion Battery Technology

The listing ceremony of CATL held at the Hong Kong Stock Exchange on the 20th. Paul Chan, Hong Kong Secretary for Financial Services, is delivering a congratulatory speech. Photo by Xinhua News Agency

CATL, the world's largest battery manufacturer, has entered the Hong Kong stock market, sparking controversy by completely blocking American investors from participating. With the U.S. government having placed CATL on its military company blacklist due to alleged ties with the Chinese military, this move is seen as an effort to mitigate risks that could arise if U.S.-China trade tensions worsen in the future. As CATL, which controls 38% of the global battery market, has raised billions of dollars through its IPO, there are expectations that the company could use these funds to secure mass production technology for sodium-ion batteries, potentially increasing its market share even further.

CATL Lists on Hong Kong Stock Exchange After Shenzhen, Rejects U.S. Investment

On May 20, CATL, a Chinese company, debuted on the Hong Kong Stock Exchange, closing at 306.2 Hong Kong dollars, 16.4% higher than its IPO price of 263 Hong Kong dollars. CATL raised a total of $4.6 billion (approximately 6.4 trillion won), making it the largest IPO globally so far this year.

CATL shares, which were already traded on the Shenzhen Stock Exchange, saw an upward trend before and after the Hong Kong listing. On May 6, the first trading day after the Labor Day holiday, CATL shares were at 231.63 yuan, rising to 263 yuan on the Hong Kong listing date of May 20. The successful IPO and the establishment of a foundation for entry into the European market were cited as reasons for the stock's rise. CATL plans to invest more than 90% of the funds raised into a battery plant currently under construction in Hungary. Once completed, the plant is expected to supply electric vehicle batteries to European automakers such as BMW, Volkswagen, and Stellantis.

CATL stated that the decision to list on the Hong Kong Stock Exchange was made to increase overseas investment, but in reality, it did not accept funds from American investors. The IPO was conducted using the 'Regulation S' method, which restricts the sale of shares to U.S. investors. As a result, American individuals and institutional investors cannot invest directly in CATL and can only invest indirectly through third-country investment institutions.

Potential U.S. Department of Defense Sanctions... Added to Military Company Blacklist 

AP Yonhap News

Initially, CATL had considered a U.S. Nasdaq listing for its IPO. However, after the inauguration of the second Donald Trump administration earlier this year, escalating trade tensions between the two countries and the U.S. Department of Defense placing CATL on its blacklist made a Nasdaq listing unlikely.

In January of this year, the U.S. Department of Defense included CATL on its Chinese military company blacklist. This list consists of companies that are deemed to be directly or indirectly controlled, owned, or operated by the Chinese military or Communist Party sub-organizations. Companies on the blacklist will be completely banned from conducting transactions or contracts with the U.S. Department of Defense starting in 2026. Although CATL has completely denied any connection with the Chinese military, the U.S. government believes that CATL is closely involved in the modernization of the Chinese military.

The prevailing analysis is that these bilateral relations influenced CATL's decision not to accept direct investment from the United States. Bloomberg News, citing sources familiar with CATL's situation, reported, "It is unusual for mainland U.S. investors to be excluded from a major IPO in Hong Kong, and this shows that U.S.-China tensions are now affecting the IPO market as well." The report added, "CATL's choice of the Regulation S method for its listing was aimed at minimizing exposure to legal liabilities in the United States."

Depending on the situation, the U.S. Treasury Department could also pressure American companies doing business with CATL to join in sanctions, so this move is intended to preemptively block any potential disadvantages for investors.

Securing Sodium-Ion Battery Technology... Will Market Share Increase Further?

Reuters Yonhap News

At a Tech Day event held two days before the opening of the Shanghai Motor Show last month, CATL announced that it had completed preparations for the commercialization of its sodium-ion battery, 'Naxtra', and that mass production would begin in the second half of the year.

With the successful fundraising from its IPO, if CATL begins mass production of sodium-ion batteries in the second half of the year, it is highly likely that its market share in the battery sector will increase even further. Last year, CATL held a 37.9% share of the global battery market, ranking first in the world for the fourth consecutive year. The second-largest company, BYD of China, had a 16.7% share, and together the two companies accounted for 54.6% of the market.

The sodium-ion batteries that CATL plans to mass-produce use sodium, which is cheaper and more readily available than nickel and lithium, the main materials in conventional batteries. In addition, sodium-ion batteries are more stable than nickel or lithium batteries, making them less prone to fire hazards.

If sodium-ion batteries are successfully commercialized and mass production begins in earnest, their prices could become lower than those of other batteries. SNE Research, an energy market research firm, stated that by 2035, sodium-ion batteries are expected to be produced at prices 11% to 24% lower than conventional batteries.