Buffett-backed BYD opens up 22% after $219m China IPO

Updated: 2011-09-16 17:15


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BYD Co Ltd, the Chinese automaker backed by US billionaire Warren Buffett surged more than 40 percent on its Shenzhen debut, as investors bet on a strong outlook for the company's fledgling electric cars business.

Thursday's jump surprised some analysts who had expected China's sixth-biggest carmaker by sales to make a weak debut after it raised 1.42 billion yuan ($219 million), a third less than it had originally sought, in the initial public offering.

The Shenzhen-based company, in which Buffett's Berkshire Hathaway Inc has a 9.9 percent stake, reported disappointing quarterly results on Wednesday. But investors focused on the outlook for the carmaker's clean tech business - now a hot investment theme on the mainland.

"People are still quite optimistic on the prospect" of BYD's battery business, said Zhang Yu, an analyst with AJ Securities in Shanghai.

The stock closed at 25.45 yuan, up 41 percent, while the benchmark Shanghai Composite Index .SSEC gained 1.2 percent and the Shenzhen index .SZSC rose 1.4 percent.

BYD shares rose to as high as 26.19 yuan versus its IPO price of 18 yuan.

"Even though there have been some negative media coverage of BYD recently, the Buffett halo, the joint EV project with Daimler and its battery technologies and EV still set it way apart from other IPO candidates especially in Shenzhen," said Yale Zhang, managing director of consultancy Automotive Foresight.

"There are hardly any companies that could have so many things going like BYD does."

BYD shares in Hong Kong closed up 5.7 percent at HK$25.15. The stock has more than trebled since September 2008 when Buffett invested in the company.

The shares have however fallen more than 42 percent so far this year, hit by worries over BYD's slowing auto sales and a lack of star models. They traded as high as HK$85 in October 2009.

BYD's Shenzhen debut comes at a time when a record number of IPOs are being postponed or canceled in Asia due to volatile global market conditions and as U.S.-listed Chinese companies hogged global headlines due to accounting scandals.

In the first half of the year, only about one-tenth of companies seeking a listing had chosen to do so on the Shanghai Stock Exchange, while the rest had gone to the smaller Shenzhen bourse, which houses the ChiNext start-up board, data compiled by Thomson Reuters showed.

BYD chose to list in the Shenzhen Stock Exchange because it first started business in the southeastern city, according to BYD's Chairman Wang Chuanfu.