On September 13, the topic of “Li Auto’s President cashed out over 90 million yuan ($12.9 million)” aroused a firestorm of debate in China. Shen Yanan, executive Director and President of Li Auto, sold 600,000 shares of the firm’s stock on September 6, cashing out $7.875 million, reducing his shareholding ratio from 1.71% to 1.68%. Just four days ago, Shen cashed out over $5 million by reducing 400,000 shares of Li Auto. In other words, in just two trading days, Shen sold 1 million shares of his own stock and cashed out about 91.15 million yuan.
At the same time, Chinese media found out that as a non-executive director of Li Auto, Wang Xing, co-founder of domestic food delivery giant Meituan, reduced his Li Auto holdings from March 29 to 30 this year. According to the HKEx, Wang reduced his holdings by 400,000 shares of Li Auto on March 29, with an average price of $27.3/share, and on March 30, he sold another 404,900 shares and 376,000 shares, with an average price of HK $107.85 /share and $27.81/share respectively.
As a result of these share sales, Wang Xing has reduced his holdings by over 1.18 million shares of Li Auto, and cashed out about 187 million yuan in total, while his shareholding ratio decreased slightly from 22.87% to 22.82%.
Public information shows that in 2019, Wang Xing led the C round financing of Li Auto, with a personal investment as high as $285 million. In 2020, Li Auto completed its D round financing led by Meituan while the latter invested $500 million. Then Li Auto went public, and Wang Xing became one of the biggest beneficiaries.
According to Li Auto‘s 2022 interim report, Wang Xing holds 22.81% of the firm’s shares via Inspired Elite Investments Limited, Zijin Global Inc., a wholly-owned company under his own name and his family’s trust.
However, Li Auto has not performed well recently. In August this year, the company only sold a total of 4,571 units, down 51.5% year-on-year and 56.1% quarter-on-quarter. In addition, the unit price of the Li ONE was dropped by 20,000 yuan before the company announced that it would stop production of the SUV model. The price drop and subsequent cessation of production brought harsh criticisms from consumers. Some consumers even initiated complaints on a Chinese complaint platform, accusing Li Auto of consumer fraud.
In fact, due to recurring virus outbreaks in the second quarter and rising battery prices, Li Auto‘s losses in the second quarter were even higher than that of last year. In the second quarter, the Li Auto achieved revenue of 8.73 billion yuan, a year-on-year increase of 73.3%. Non-GAAP operating losses, however, reached 521 million yuan, up 42.5% year-on-year.