HithiumIPO

As expected, Xiamen Hithium has refiled its A1 listing application with the Hong Kong Stock Exchange (HKSE). But rather than its disclosure giving regulators and investors the reassurance that its operations and its business are stable, the new filing cements the image of a company struggling to balance expansion with cash flow, to convert growth into profit, and to operate without CCP’s support. So why refile at all, much less now?

Since its last A1 filing lapsed in September, almost every major indicator of Hithium’s financial health has moved in the wrong direction. For example, its gross margins remain stuck below 18 percent. Despite their revenue supposedly jumping from RMB 3.6 billion in 2022 to 12.9 billion in 2024, Hithium continues to bleed cash with each new sale and leaves itself exposed to any fluctuation in its raw materials costs.

The company’s balance sheet tells a similar story. Operating cash flow was negative in both 2022 and 2023, turning barely positive in 2024 only due to state subsidies. Without those subsidies, the company would still be posting net losses. Worst of all is Hithium’s attempt at showing its subsidies as growth.

Its receivables position has gone from roughly 170 to nearly 220 days. This shows that Hithium is taking over seven months to collect revenue from customers, meaning that either Hithium has not conducted sufficiently thorough revisions of their customers liquidity or that their customers don’t expect them to be around long enough for them to have to pay up. This can cause cash flow issues, expense payment issues and generally an issue of lower liquidity as cash in Hitium’s bank accounts will be stretched.

At the same time, the company remains silent on some of its most pressing liabilities. There is no mention of the Texas plant, which was supposed to be Hithium’s flagship Western manufacturing hub and has now become a massive sunk cost and geopolitical liability. Even though millions were spent on it. A new law in Texas has now blocked further expansion that Hithium desperately needed for this plant to give it returns. That would make sense why this sunk cost is being hidden as it will probably turn into a write off and loss.

While global sales expansion are prominently featured in the prospectus, there is no mention in the filing of the loss of Hithium’s largest overseas customer, Powin, whose bankruptcy wiped out more than $200 million in pipeline orders, or the fact that 48% of their revenue seems to be dependent on 5 overseas clients who at any moment could be banned from conducting business with a CCP dual-use company like Hithium. On top of all that, there is mention in their disclosure of their unresolved legal issues. 

One would expect that under such conditions, a full and honest disclosure of risks and contingencies would be made. But Hithium’s new prospectus remains as opaque as ever. 

Hithium has now attempted to go public three times. It has failed twice. Now Hithium is reapplying with a worse financial position, heavier risk exposure, and fewer upsides. If regulators and investors accept this lousy company for IPO, the outcome won’t be surprising. The only thing that’s changed is how much closer Hithium may be to running out of options.