Geely Automobile Holdings (HKG: 0175) is reportedly facing investor dissatisfaction with its privatization proposal for Zeekr (NYSE: ZK), with investors believing the offer to be too low.
Five early investors in Zeekr have written to its board, stating that Geely’s $2.2 billion privatization offer undervalues the premium electric vehicle (EV) unit, Reuters reported today, citing three sources directly familiar with the matter.
Investors including CATL (SHE: 300750), Intel Capital, and Boyu Capital, who participated in Zeekr’s first round of financing, have sent two joint letters to Zeekr and its newly established special committee, stating that the privatization price is too low to reflect Zeekr’s fair value, according to the report.
In the first letter sent last week, the five investors said that the privatization price values Zeekr at just $6.5 billion, far below peers such as Li Auto (NASDAQ: LI), Nio (NYSE: NIO), and Xpeng (NYSE: XPEV), according to the three sources.
They noted that Zeekr’s cash flow and profit prospects are better than those of its peers and urged that the transaction only proceed with the approval of a majority of “independent minority” shareholders.
Two of the sources said the investors sent a second letter this week reiterating what they said in the first letter and urging Zeekr’s special committee to carefully review and evaluate the offer.
The five investors participated in Zeekr’s first round of external financing in 2021, which raised $500 million, valuing the company at $9 billion. At the time, they collectively held a 6 percent stake in the company, as noted in the Reuters report.
A subsequent round of financing valued Zeekr at $13 billion in 2023, but a year later, the company’s valuation at the time of its IPO was just $5.5 billion, less than half of its pre-IPO valuation.
Two sources said that Y2 Capital, an investor in Zeekr’s IPO, had also sent a similar letter to Geely’s leadership expressing concerns, according to Reuters.
However, analysts noted that given Geely Auto’s 65.7 percent stake in Zeekr, the company may have sufficient voting rights to proceed with privatization without the approval of other shareholders.
Geely announced on May 7 that it had submitted a non-binding offer letter to Zeekr proposing to privatize the EV unit.
The proposed purchase price was $2.57 per Zeekr share or $25.66 per American Depositary Share (ADS). This price represents a premium of about 13.6 percent over Zeekr’s closing price on the US stock market on May 6.
Geely currently holds about 65.7 percent of Zeekr’s shares. If the privatization is completed, Zeekr would become a wholly-owned subsidiary of Geely and will delist from the New York Stock Exchange.
The proposed purchase price is $25.66 per Zeekr ADS, a premium of 13.6 percent from the last trading session.
