BYD Shares Fall After Dilution from Share Sale

BYD Co. (1211), the Chinese automaker partially owned by Warren Buffett’s Berkshire Hathaway Inc. (BRK/B), fell in Hong Kong trading after selling HK$4.27 billion ($550 million) of new stock to help fund investments.

The stock declined 8.3 percent to $37.75 at 9:30 a.m. in Hong Kong. BYD sold 121.9 million shares at HK$35 each, 15 percent below their price before they were halted from trading last week, pending an announcement.

Proceeds from the stock sale, BYD’s biggest since its 2002 initial public offering, give the Shenzhen-based carmaker room to step up investments and bolster production of electric vehicles as governments worldwide step up efforts to fight pollution. Selling shares will also help alleviate the strain on a balance sheet saddled with surging debt.

“Its core car business is deteriorating, the firm’s balance sheet is weak, and its EV business is just starting to grow,” Ole Hui, a Hong Kong-based auto analyst with Mizuho Financial Group Inc. wrote in a research note today. “The equity issuance is much needed.”

Shares of companies typically fall when they disclose large issuances of new stock because they dilute the value of existing shares.

The sale came after BYD said that profit tumbled 89 percent in the first quarter because of declining demand for its gasoline-fueled vehicles. Last year, profit jumped almost sevenfold after billionaire founder and Chairman Wang Chuanfu, completed a three-year reorganization during which he cut the number of dealerships and narrowed losses at the solar business with the aid of state incentives.

Photographer: Nelson Ching/Bloomberg

Wang Chuanfu, chairman of BYD Co. Ltd., speaks during a media event in Beijing. The new stock sale came after BYD said that profit tumbled 89 percent in the first quarter because of declining demand for its gasoline-fueled vehicles. Close

Wang Chuanfu, chairman of BYD Co. Ltd., speaks during a media event in Beijing. The new... Read More

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Photographer: Nelson Ching/Bloomberg

Wang Chuanfu, chairman of BYD Co. Ltd., speaks during a media event in Beijing. The new stock sale came after BYD said that profit tumbled 89 percent in the first quarter because of declining demand for its gasoline-fueled vehicles.

To contact Bloomberg News staff for this story: Tian Ying in Beijing at ytian@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net Frank Longid

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