The Xpeng P7 electric vehicle.
Jeenah Moon/Bloomberg
Shareholders of the Chinese electric vehicle maker XPeng appear to be selling stock. The sales don’t raise additional growth capital. This is a secondary stock sale, in which some early investors are taking money off the table.
Tuesday, reports said that XPeng (ticker: XPEV) shareholders will offer about 10.5 million American depositary receipts, or ADRs, between $32.25 and $35.75 a share, depending on where the broker handling the large block of stock is able to set the price.
Each ADR of XPeng represents two shares of common stock.
XPeng stock closed Monday at $38. Large blocks are often priced at a discount to the market because it is hard for brokers to sell a lot of stock at once. Roughly 15 million XPeng shares trade a day, so 10.5 million is a large amount to add on any given day.
XPeng told Barron’s it can’t comment on stock sales by others. But the move shouldn’t be a big surprise to investors. The stock sale is coming as a lockup on sales related to XPeng’s initial public offering expires. Insiders and early investors are often prevented from selling shares in a newly public company for a period, typically 180 days. XPeng’s IPO tool place in late August, about six months ago.
XPeng stock, coming into Tuesday, was down about 21% in February. Stock in Xpeng peers Li Auto (LI) and NIO (NIO) shares were down closer to 10% for the month, as was stock in the Chinese companies’ larger rival, Tesla (TSLA). Investors appear to have been selling some shares ahead of the IPO lockup expiration.
XPeng stock was down 10.3% in morning trading at just above $34. NIO and Li shares are lower too, by roughly 14% and 12%, respectively. Tesla stock was down almost 11% to about $639. That is lower than the price at which Tesla shares entered the S&P 500 at in late December.
The secondary sale can’t be blamed for the entire drop in XPeng or the other Chinese stocks. U.S. stocks are falling and high-growth stocks are getting hit harder. The Nasdaq Composite, home to many high-growth tech stocks, was down about 3% after the index fell 2.5% on Monday.
Inflation fears appear to be the catalyst for the selloff. Investors are worried that all the stimulus the government is pumping into the economy will result in higher prices, an overheating economy and, ultimately, higher interest rates.
High-growth stocks, like those of EV companies, tend to fall harder when interest rates rise. High rates cause investors to re-evaluate what to pay for growth. Why invest in something that will generate cash flow and pay dividends far down the road when there are options for generating investment income now?
Write to Al Root at [email protected]
