According to Bloomberg, BYD $BYD COMPANY(01211.HK) is seeking to raise to $5.2 billion (approximately HKD 40.4 billion) through a placement of shares, issuing 118 million shares at HKD 333-345 per share. The placement price represents a discount of 5.1%-8.4% compared to the closing price of HKD 363.6 on March 2, so the new issuance of 118 million shares is expected to dilute the existing equity by about 3.9%.

The question that Dolphin Research is concerned about is why BYD is conducting a Hong Kong stock issuance at this moment?

Although the company has not disclosed the use of the raised funds, since the funds are in US dollars, Dolphin Research expects it is likely due to the overseas expansion plan in 2025, which requires foreign currency funds to seize the opportunity for overseas development. Most of BYD's cash is in RMB, and the outflow of RMB is relatively complex, so this issuance to raise US dollars is not a cash flow issue for BYD itself (as of the third quarter of 2024, the net cash on the books is still around 36 billion yuan).

However, due to the discounted issuance and the relatively large discount (about 5.1%-8.4%), it is expected that the stock price will experience a significant pullback tomorrow due to market sentiment (large discounted issuance + concerns about BYD's liquidity situation), which will somewhat harm the interests of small shareholders. But from a long-term perspective, in addition to the positive impact of the "Equal Rights in Intelligent Driving" emphasized by Dolphin Research in the article “Can 'Equal Rights in Intelligent Driving' Really Create Another BYD?”, Dolphin Research believes that BYD's issuance for overseas expansion plans is likely to drive BYD's overseas sales this year to exceed expectations (currently, overseas sales have been strong for two consecutive months at 66,000/67,000 units), which may present a better entry opportunity.

From the current order volume tracking, weekly orders have reached 85,000-90,000 units, exceeding last May's level, mainly due to the inventory clearance of older models, with the proportion of intelligent driving models still not high. However, intelligent driving models are set to be launched intensively in March and April, and Dolphin Research remains optimistic about the order volume opportunities after the launch of intelligent driving models.