China Auto Logistics raises $5.25m through private equity placement

Shiping Tong, CEO and chairman of China Auto Logistics, said the deal showed that investors appreciate the company's strength and growth potential. "Based on very thorough due diligence, these investors reached the conclusion that our company has and will continue to be very transparent while generating outstanding performance, and believe our shares are significantly undervalued mainly because of the prevailing negativity temporarily affecting all Chinese company shares in the US."

Short-seller attacks on a growing number of small- to mid-cap Chinese companies listed in the US have hurt the stock prices of all firms that fall into this category. Most of these companies went to market via reverse mergers - whereby a non-listed company purchases a passive but publicly-traded entity - a quicker, cheaper and less regulatory burdensome route to market than IPOs although it doesn't involve capital raising. However, a number of firms have since been exposed for overstating revenues, exaggerating market positions and shifting cash off the books through related-party transactions.

Some private equity players, notably The Carlyle Group, have seen portfolio companies embroiled in fraud allegations. Others have taken advantage of the undervalued market and made investments or acquisitions, often participating in management buyouts. In recent weeks, Morgan Stanley Private Equity Asia has taken a minority stake in Yongye International and Abax Global Capital backed the chairman of Harbin Electric in his privatization bid.

Tong said that China Auto Logistics' financial position was strong even before the placement, with more than $37.1 million in cash can cash equivalents of $7.5 million at the end of the first quarter. The company will use the additional capital to complete the acquisition of an auto mall in Tianjin, which it plans to turn into the largest auto dealership in the city.

Tong claims that China Auto Logistics is the country's largest wholesaler of imported luxury vehicles with a network of more than 3,000 dealers nationwide. However, luxury autos account for just 4% of total vehicle sales. Tong said that luxury sales saw double-digit growth in the first five months of the year, while overall sales increased by around 7%.

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• Topics
• Greater China
• PIPEs
• North America
• Industrials
• The Carlyle Group
• Abax Global Capital
• Morgan Stanley Private Equity Asia