> Warren Buffett Blog: Buffett automaker BYD to do placement

Wednesday, June 3, 2015

Buffett automaker BYD to do placement

BYD halted trading on its shares saying it was preparing for a potential private placement.

China Merchants Securities, Guosen Securities and UBS Securities were working on the deal, with other banks joining the deal later, added IFR. Details of the deal are yet to emerge.

The company, which counts Warren Buffett’s Berkshire Hathaway Inc.as a shareholder, joins the rush of Chinese companies tapping the equity market. “It makes perfect sense to go ahead with a share placement now, given the rally in the market”.

To date, the firm has not specified what the funds from the placement will be used for, but issuing shares now allows the company to take advantage of the increase in its share price.

BYD Co. will spend the proceeds from a planned share sale to increase its capacity to manufacture batteries to meet the growth in demand for electric vehicles. The analyst also suggests that the funds will be further financed in research and development and will give the company an edge over its competitor, Tesla.

BYD made the announcement via a posting on a Shenzhen stock exchange affiliated website. The group has laid out its plans to compete with Tesla in the EV market, where its only real advantage right now batteries. Efficient, Lightweight and High energy are considered to be the few vital components to make a successful electric car. They also pledged to deliver more electric buses on the United States market after securing recently a big contract from a mass-transit operator last month. It also plans to start taking orders for electric trucks from overseas buyers in the second half of the year and begin deliveries in 2016, with the U.S. being one of the likely first destinations, the company said.