XPeng sells stock. But don’t raise more money.

Text size

Chinese manufacturer of electric vehicles

XPeng

sell shares, but not to raise additional growth capital. This is a secondary sale of shares in which some early investors take their money off the table.

On Tuesday, reports said that XPeng (ticker: XPEV) will offer about 10.5 million US deposit receipts or ADRs, between $ 32.25 and $ 35.75 per share, depending on where the broker that manages the large stock block is able to set the price.

Each XPeng ADR represents two common stock actions.

XPeng shares closed at $ 38 on Monday. Large blocks are often at low market prices because it is difficult for brokers to sell a lot of shares simultaneously. About 15 million XPeng shares are traded per day, so 10.5 million is a large amount to add on a given day.

The sale of shares comes as a blockage of sales related to the initial public offering XPeng expires. Insiders and early investors are often prevented from selling shares to a recent public company for a period of time, usually 180 days. The XPeng IPO tool was placed at the end of August, about six months ago.

XPeng shares fell about 21% in February. Stock in Xpeng colleagues

Read Auto

(LI) and

NIO

Shares (NIOs) fell close to 10% for the month, as did shares of China’s largest rival, Tesla (TSLA). It appears that investors sold some shares before the IPO block expired.

XPeng shares fell 6.6% in premarket trading to approximately $ 35.50. The shares of NIO and Li were even smaller. Tesla shares fell nearly 5% to $ 680. It traded briefly at about $ 650 on Tuesday morning, the price at which Tesla shares entered the S&P 500 at the end of December.

The secondary sale cannot be blamed for the entire decline of XPeng or other Chinese stocks. US futures have declined and high-growth stocks are increasingly affected. Futures on

Nasdaq Composite,

home to many high-tech technology stocks, they fell about 1.5% after the index fell 2.5% months.

Inflation fears appear to be the catalyst for the sale. Investors are worried that all the stimulus the government is pumping into the economy will result in higher prices, an overheated economy and, ultimately, higher interest rates.

High-growth stocks, like those of EV companies, tend to fall harder when interest rates rise. High rates cause investors to re-evaluate what to pay for growth. Why invest in something that will generate cash flows and pay dividends much further, when there are options for generating investment income now?

Write to Al Root at [email protected]