On January 17, recently, Weilai automobile and GAC group responded to the rumor that “GAC group plans to invest $1 billion in Weilai automobile”.
GAC group issued a Clarification Announcement, pointing out that the information was untrue.
“At present, the two sides have discussed Weilai’s financing plan, but it is still in the early stage and has not formed any binding agreement. There is great uncertainty whether an agreement can be reached in the end.” On the 16th, GAC group responded in an interview with times finance.
In response, the relevant person further said that even if GAC participates in the future, it is expected that GAC will participate in the investment through its subsidiaries by raising funds with some of its own funds. It is expected that the total amount of its own funds and raised funds will not exceed US $150 million.
Meanwhile, according to foreign media reports, Weilai automobile, another party involved in the incident, also confirmed contact with GAC but failed to reach an agreement. Times finance conducted an interview with Weilai automobile, but as of press time, no reply has been received.
However, stimulated by this news, Weilai automobile’s share price soared last night and triggered a circuit breaker, resulting in its suspension of trading on the New York Stock Exchange, rising about 17% before the suspension. After the resumption of trading, the increase fell somewhat. As of today’s close, the share price rose 14.1% to $4.29, with a current market value of about $4.516 billion.
In fact, in the past 2019, Weilai automobile was in a difficult situation in the eyes of the outside world. Es8 spontaneous combustion, recall and large-scale layoffs led to the sharp decline of nearly 90% of Weilai’s share price, which was once close to US $1, and even faced the risk of “RMB 1 delisting”
At the same time, the performance of Weilai automobile is not optimistic. According to the third quarterly report of 2019, Weilai’s net loss in the third quarter was RMB 2.527 billion, a year-on-year decrease of 10.3%, but the loss narrowed.
The business situation has improved, so that Weilai has shown signs of recovery and rebound since the end of last year. In addition to the share price, the sales performance is also commendable.
Recently, Weilai released the sales data of 2019, with 20565 vehicles delivered in the whole year. Since the delivery began in June 2018, the whole brand has delivered 31913 units in total.
However, Weilai automobile still faces a large capital gap. In addition to the performance still failed to turn around the loss, as of September 30, 2019, the total amount of cash, cash equivalents, restricted cash and short-term investment held by Weilai automobile was 1.960.7 billion yuan (about 274.3 million US dollars), which was less than 2 billion yuan.
To this end, Weilai also issued a continuous operation warning, saying that the company’s cash balance is not enough to provide the working capital required for Weilai’s continuous operation for 12 months, and the continuous operation depends on whether the company can obtain sufficient external equity or debt financing.
At the same time, in the third quarter earnings conference call, representatives of Credit Suisse, Goldman Sachs, UBS and other institutions expressed doubts about Weilai’s cash flow or financing status.
It is noteworthy that since last year, Weilai automobile has not gone smoothly in seeking financing.
In May last year, Weilai announced the signing of a framework agreement with Yizhuang Guotou. Weilai will establish a new entity “Weilai China” and inject some businesses and assets into the entity. Yizhuang Guotou will invest 10 billion yuan, but the above capital injection has not yet been implemented.
Last October, Weilai automobile was reported to have negotiated a financing of more than 5 billion yuan with Huzhou City, Zhejiang Province. However, later, the Foreign Publicity Office of Wuxing District, Huzhou City told the media that the financing negotiation with Weilai automobile was suspended. It is pointed out that one of the reasons is that the evaluation of investment is “too risky”.
Industry insiders believe that Weilai is constantly improving its operation by increasing sales and reducing costs. If it can get a capital injection of US $1 billion from GAC this time, it will help to solve the funds needed for its operation in 2020. Weilai can also take this opportunity to enter a virtuous circle.
However, at present, the relevant progress and the amount of capital injection have been denied by GAC and Weilai, and Weilai still has a long way to go in seeking financing.
It is noteworthy that GAC Weilai has had a lot of “interaction” recently. It is reported that GAC Weilai, a joint venture established by the two sides, is carrying out a new round of financing of 1.5 billion yuan. This round of financing is mainly used for R & D, user operation, brand and channel maintenance and operation.