I read with interest that car maker BYD (HKEx: 1211), whose stock soared after Warren Buffett invested the company, only to crash more recently as sales stagnated, has finally won approval for a major new listing in China’s Shenzhen A-share market. (English story) I thought about it for a few minutes, trying to think if yet another distraction for this company, even if it was intended to raise more money, was a good thing, a bad thing, or generally neutral. In the end I’ve decided it will probably be good, but not because it will raise more money for the company to pursue its new energy dreams, which still have me highly skeptical. (BYD’s latest EV announcement) Instead, I think this listing could be good for BYD because it will force the company to do more to improve its image and performance in its home China market, since buyers of the stock will be the same Chinese who buy BYD cars. One of BYD’s biggest problems right now is that it’s neglecting its core car business in pursuit of loftier things, mostly electric. But having millions of Chinese shareholders looking over its shoulder after this A-share sale could be just the tonic this company needs to force it to focus on the present as well as the future.
Bottom line: BYD’s A-share sale could finally make this starry-eyed company return to basics or risk major volatility from unhappy investors in its home market.
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