Sunwoda Electronic Co., Ltd. announced on December 26, 2025, that its subsidiary, Sunwoda Power, has been sued by WeiRui Electric Vehicle Technology (Ningbo) Co., Ltd., a company under Geely Holding Group, with a claimed compensation amount reaching a substantial 2.314 billion yuan. The lawsuit alleges quality issues with battery cells delivered between June 2021 and December 2023. Currently, the case has not yet gone to trial, and the final judgment remains uncertain. For Sunwoda, this lawsuit involves a massive sum that could not only impact its cooperation with major automakers but also significantly affect its future capital market activities.
According to financial reports, Sunwoda's combined net profit attributable to shareholders for 2023 and 2024 was approximately 2.544 billion yuan. The claimed compensation amount is nearly equivalent to its total net profit over the past two years. Since the incident emerged, Sunwoda's stock price has fallen by over 10%, wiping out roughly 6 billion yuan in market capitalization.
Previously maintaining a relatively high-frequency fundraising rhythm since its listing on the Shenzhen Stock Exchange in 2011, Sunwoda has recently encountered obstacles in its capital operations over the past three years. It conducted a private placement raising nearly 2.6 billion yuan in 2018, issued 1.1 billion yuan in convertible bonds in 2020, secured another 3.9 billion yuan private placement in 2021 (with participation from renowned domestic and international institutions like UBS, Barclays, and E Fund), and further raised approximately $440 million through a GDR listing in Switzerland in 2022. However, according to a July 2025 announcement, only 130 million yuan and 320 million yuan remained from the 2020 convertible bond and 2021 private placement proceeds, respectively, while the entire GDR fundraising from 2022 had been fully depleted.
In contrast to its previous smooth fundraising, Sunwoda's capital initiatives have repeatedly stalled recently. A planned 4.8 billion yuan private placement in March 2023 was withdrawn just five months later. In July of the same year, it announced plans to spin off Sunwoda Power for a listing on the ChiNext board; although it completed the filing for listing guidance in October, it never submitted a prospectus. Reports in June 2024 suggested a pivot to listing the subsidiary in Hong Kong, but this plan also faded without further updates following Sunwoda's own announcement in July 2025 regarding its intention to list in Hong Kong. These repeated setbacks in capital operations seem to subtly reveal underlying regulatory challenges.
The unresolved lawsuit is expected to impact regulatory review progress, making a stall in the Hong Kong IPO highly probable. In September 2025, the International Department of the China Securities Regulatory Commission raised feedback concerning Sunwoda's share pledge situation, debt repayment capacity, contract fulfillment, compliance of equity changes, and potential nominee shareholdings. This recent lawsuit further amplifies uncertainty surrounding the listing process, directly affecting the IPO timeline.
Based on the review practices of the CSRC's International Department and the Hong Kong Stock Exchange, major pending litigation is considered a core issue affecting sustainable operating capacity. Regulatory authorities typically require clear developments in such matters before proceeding with subsequent approvals. Currently, the case is merely filed and accepted, not yet scheduled for a court hearing, making a swift resolution unlikely. Coupled with the previous regulatory feedback, Sunwoda's Hong Kong listing application is most likely in a state of suspension.
Furthermore, the Hong Kong IPO might face heightened pressure regarding investor order demand. Even before the lawsuit emerged, information about publicly selling anchor investment slots for Sunwoda's Hong Kong IPO, involving roughly $20 million, appeared on a social media platform. The international placement segment of a Hong Kong IPO is intended solely for qualified institutional investors, and such information should circulate only within professional circles. Its leakage onto social media may indirectly indicate potential underlying softness in demand.
More critically, its industry competitor, EVE Energy Co., Ltd., submitted its Hong Kong listing application earlier than Sunwoda (EVE Energy initially filed in June 2025 and submitted updated materials for a second filing in January 2026). Prior to this, investment institutions were likely comparing and selecting between the two peer companies planning listings. Following the emergence of Sunwoda's lawsuit and the associated uncertainties, institutional funds might pivot towards competitors like EVE Energy, thereby intensifying pressure on its order book.
Notably, comments within the social media post discussing the sale of IPO slots also suggested that the offering price might be planned at a 10% discount. Historically, Sunwoda's GDR listing in 2022 had an issuance discount of approximately 16.12%, and its 2021 private placement was discounted by about 11.96%. However, due to differences in markets, financing instruments, and market conditions, these past discounts are not entirely comparable.
In 2025, only the A-to-H listing of Contemporary Amperex Technology Co., Limited (CATL) achieved a discount within 10%. Sunwoda exhibits a significant gap compared to CATL in terms of company scale and market competitiveness. A previous attempt by Baili Tianheng to issue with a low discount around 10% ultimately failed. Referencing companies with similar market capitalizations, such as CNGR Advanced Material Co., Ltd. and Joyson Electronics Corp., their Hong Kong share issuances involved discounts reaching around 35%. Against the backdrop of the lawsuit's impact and declining market confidence, institutional investors are likely to demand a higher discount as a risk buffer, which would further compress its fundraising potential.
Even facing the dilemma of a potentially larger issuance discount and reduced financing efficiency, Sunwoda may have no choice but to push forward with the offering. Its current performance remains challenging, cash flow pressure is significant and cannot be ignored, and substantial future investment needs persist.
For the first three quarters of 2025, Sunwoda reported operating revenue of approximately 43.5 billion yuan and a net profit attributable to shareholders of 1.405 billion yuan, representing a year-on-year increase of 15.94%. Both its gross profit margin and net profit margin attributable to shareholders saw slight improvements to 16.8% and 3.2%, respectively, reaching recent highs.
However, its profitability still lags behind competitors. In the first half of 2025, the gross profit margin for Sunwoda's power battery business was only 9.8%, significantly lower than the 22.4% achieved by CATL and the 17.6% reported by EVE Energy.
In the first three quarters of 2025, the company's net cash flow from operating activities was 2.42 billion yuan, a decrease of 7.5% year-on-year, presenting an awkward situation of "earning profit but not cash." Simultaneously, cash outflow from investing activities reached 6.33 billion yuan. This substantial capital expenditure further intensified working capital pressure, forcing the company to rely on 5.59 billion yuan in cash flow from financing activities to support normal operations during the first three quarters.
Its high-debt expansion model adds further strain to its funding chain. As of the end of September 2025, its asset-liability ratio stood at 67.6%, with total liabilities soaring to 67.9 billion yuan. Among these, short-term borrowings amounted to 17.3 billion yuan, up 43.2% year-on-year, while long-term borrowings reached 9.9 billion yuan, increasing by 37.7% year-on-year.
According to its 2025 semi-annual report, the company currently has 10 production bases under construction. For five key ongoing projects, 17.3 billion yuan has already been invested, with an estimated additional 22 billion yuan required based on budgets. Furthermore, according to its Hong Kong IPO prospectus, the planned new production base in Vietnam, for which the raised funds are intended, has a total estimated investment not exceeding 2 billion yuan. Facing this massive funding gap, the successful progression of the Hong Kong IPO had become a crucial lever to alleviate its financial pressure. Now, stalled by the lawsuit, the strain on its funding chain has intensified significantly.