Chinese automaker BYD’s chip unit IPO plan halted by regulatory concerns
TAIPEI – Chinese electric car maker BYD’s plan to list its semiconductor arm has been put on hold due to a regulatory probe into the law firm advising the company on the deal, in authorities’ latest sign Chinese companies tightening their control over local technology companies and capital markets.
BYD Semiconductor, China’s largest maker of automotive microcontroller chips, in May filed for listing on the Shenzhen ChiNext, a Nasdaq-like market overseen by the Shenzhen Stock Exchange. The company aimed to raise at least 2.68 billion yuan ($ 412 million) for the development of automotive chips, according to its prospectus. The exchange accepted the IPO application for review in June.
That plan was put on hold, however, due to a regulatory investigation by the Security Regulatory Commission into the Beijing Tian Yuan law firm, one of China’s largest legal service providers. The law firm, which has helped companies like Bilibili and Nongfu Spring with their own listing plans, was advising BYD on the market debut of its chip unit.
“The [Shenzhen Stock Exchange] necessary to suspend consideration of these IPO plans “due to the investigation, the Shenzhen Stock Exchange said in a public notice issued over the weekend, adding that it had halted consideration of the application by BYD on Aug. 18. About 10 other listing plans were advised by Beijing Tian Yuan was also suspended, although neither the Shenzhen Stock Exchange nor the Security Regulatory Commission gave a reason for the investigation.
BYD Semiconductor competes directly with international players such as Infineon in Germany and Rohm Semiconductor in Japan. Investors had said the company was on the verge of being the “number one auto chip stock in China.”
Its parent company BYD is China’s largest automaker in terms of market capitalization and is backed by US investment heavyweight Warren Buffett. This year, he created the chips branch that he had founded in 2004 to accelerate the development of his chips.
Several other listing plans involving other law firms, accountants and securities companies under investigation have also been halted, according to the public notice, although no reason for these investigations has been given. more.
A venture capital source familiar with the China IPO process told Nikkei Asia that the BYD unit’s listing plan has not been terminated but could be delayed for several months while the company settles the problem and updated all the necessary documents.
However, if BYD Semiconductor’s IPO plan were to be canceled, it would be the first major chip company to encounter regulatory hurdles in seeking public funding since Beijing stepped up its review of listings of companies. Chinese authorities scuttled what would have been a successful IPO by Ant Group last year and launched cybersecurity reviews of Didi Global following the listing of ridesharing in the United States. Regulators have also recently stepped up oversight of the country’s private education sector.
BYD’s listing plan for its chip unit comes as the world grapples with a severe chip supply crisis that has hit a huge number of industries, from PCs, servers, home appliances to automobiles. Major economies are all striving to strengthen their local semiconductor industries and build more resilient supply chains due to national security concerns.
BYD controls over 70% of its semiconductor business, while BYD Semiconductor counts its parent company as its largest customer, accounting for 59% of its revenue in 2020. Other notable investors include the fund. investment from Xiaomi, the world’s second-largest smartphone maker that has announced plans to enter the electric vehicle market by 2024.
BYD, BYD Semiconductor and Zhu Xiaohui, a partner in Beijing Tian Yuan law firm that directly oversaw BYD Semiconductor’s listing, did not respond to Nikkei Asia’s requests for comment at the time of posting.