Investors Think Geely's Zeekr Offer is Too Low

Okay, so get this. China's car giant, Geely, is apparently shortchanging its cool electric car brand, Zeekr. At least, that's what five early investors are saying.

Apparently, these investors, including some big names like CATL and Intel Capital, wrote a couple of letters to Zeekr's board. They're basically saying the offer Geely made to buy them out, which was for 2.2 billion dollars, is way too low. They think it doesn't show what Zeekr is really worth.

Geely, if you didn't know, is a really well-known car company globally, partly because they own brands like Volvo and Proton. They offered to take Zeekr private on May 7th. Their idea is to fully merge Zeekr into Geely Auto. Geely Auto already owns about two-thirds of Zeekr. Both of these companies are under the bigger Geely Holding umbrella. And get this, the guy who founded Geely, Eric Li, is also the boss at Zeekr.

This move kinda surprised everyone, especially since Zeekr just went public in the US a year ago. It also makes you wonder about Geely's other units that are planning to go public in Hong Kong, like the ride-hailing company CaoCao Inc. And maybe, just maybe, they might even take other US-listed units, like Polestar, off the market.

The other two investors who wrote the letters are Bilibili and Cathay Fortune Corp. Geely's spokesperson said they're still talking with a special committee Zeekr set up to look at the offer. Zeekr and the other investors didn't really say anything when asked. Bilibili straight up said nope, couldn't comment. Geely Auto's filing says the offer isn't final yet. It will only be set in stone once they sign the real agreements, you know, based on the terms and stuff.

So, Eric Li has been shifting Geely's focus. Instead of just buying up companies left and right, he's trying to make things run smoother and cut costs because, man, the car market in China is super competitive with crazy price wars. Last year, he started this whole thing to make the group's focus clearer and stop different parts of the company from competing with each other. This has meant splitting brands into two groups and combining teams working on things like digital dashboards.

Right now, Zeekr is seen as Geely's shining star. They sold over 41,000 cars in the first three months of this year, which is 25% more than last year. They even sold more than BYD's premium brand, Denza. The five investors said in their first letter last week that the buyout offer only values Zeekr at 6.5 billion dollars. They think that's way less than similar companies like Li Auto, Nio, and Xpeng. They argued that Zeekr is actually doing better when it comes to cash flow and making money than those other companies. They're basically saying the deal shouldn't happen unless most of the 'independent' shareholders agree.

Sources said the investors sent another letter this week, pretty much saying the same thing and telling the Zeekr committee to really take their time and think about the offer. These five investors were part of Zeekr's first big fundraising round back in 2021. They put in 500 million dollars, and at the time, Zeekr was valued at 9 billion dollars. They owned about 6% of the company back then. Later, in 2023, another fundraising round valued Zeekr at a whopping 13 billion dollars. But then, a year later, it went public at a valuation of only 5.5 billion dollars when you look at all the shares, which is less than half of that pre-IPO number. Two sources also mentioned that Y2 Capital, another investor, sent a similar letter to Geely, sharing their worries. Y2 Capital didn't respond when asked about it.

Geely's offer is $25.66 per share for Zeekr, which was about a 24% higher than the average price over the month before the offer. But, you know, the average premium for these kinds of buyout deals in the US has been around 40% since last year. Funny thing is, Zeekr shares are actually trading higher than the offer price right now, closing recently at $26.59. However, some experts think Geely might still have enough votes to push the buyout through without needing approval from other shareholders because they own a big chunk, like 65.7% of Zeekr.