Contemporary Amperex Technology Co. Ltd. (CATL), the electric vehicle battery giant, is set to raise over $5 billion through a high-profile Hong Kong listing. While the deal promises a much-needed boost to the city’s struggling IPO market, its razor-thin underwriting fees are sparking concerns among Wall Street banks and international financial institutions.
CATL’s offering, anticipated to be one of the largest in Hong Kong this year, proposes a base underwriting fee of just 0.2%, plus potential incentives, far below the typical rates seen for similar deals. Recent listings, such as Midea Group Co.’s $4.6 billion Hong Kong float, offered higher fixed fees of 0.6% with additional incentives. CATL’s fee structure raises fears that competitive pricing may become a norm in Hong Kong’s IPO market, making deals less lucrative for global banks.
Wall Street firms such as Bank of America, JPMorgan Chase, and others have joined CATL’s syndicate despite the low fees. The move underscores the pressure to remain involved in major deals, even as Chinese underwriters increasingly dominate the market with aggressive strategies and lower fee structures.
Hong Kong’s IPO market has become vital for Chinese banks after mainland regulatory restrictions in 2023 limited domestic public offerings. This shift has driven fierce competition among underwriters, particularly for second listings by Shenzhen or Shanghai-listed firms like CATL. The battle for market share has eroded the margins historically enjoyed by international banks.
Despite these challenges, Hong Kong’s IPO market shows signs of recovery. Analysts project total proceeds could double to over $22 billion in 2025, fueled by listings from China-based firms and second floats by US-listed Chinese companies. However, the rise in volume may not offset the diminished profitability per transaction for banks.
The CATL listing represents not only an opportunity for Hong Kong’s financial market but also a test of how much global banks are willing to compromise in a landscape increasingly shaped by competition from local firms. Whether the anticipated surge in deal flow can sustain interest from international players remains an open question.
