Hesai Group's Strategic IPO Execution: Analyzing the Implications of a Fully Exercised Over-Allotment Option

In September 2025, Hesai Group's Hong Kong IPO marked a pivotal moment for the lidar industry, with the full exercise of its over-allotment option underscoring robust market confidence. The company's underwriters exercised the 15% over-allotment option, issuing an additional 2,932,500 Class B ordinary shares at HKD 212.80 per share, raising HK$605 million in proceeds, according to a Futunn announcement. This brought the total global offering to HK$4.16 billion, a figure that not only solidified Hesai's financial foundation but also signaled institutional trust in its long-term growth strategy, as reported in a MarketScreener report.

Strategic Allocation of Funds: Fueling Innovation and Scale

Hesai's allocation plan for the IPO proceeds reflects a calculated approach to maintaining its leadership in the lidar sector. According to the company's official disclosures, 50% of the funds will be directed toward research and development (R&D), 35% to manufacturing expansion, and the remaining 15% to business development and operational needs. This prioritization aligns with the company's recent return to profitability, as evidenced by its Q2 2025 net income of CNY 44.09 million-a stark contrast to its prior years of heavy investment and losses, per a ChinaBizInsider article.

The R&D allocation is particularly critical. Hesai has been named the top automotive lidar company for four consecutive years by Yole Group, capturing 33% of the global market by revenue in 2024, according to a LIDAR Magazine article. With the additional capital, the firm aims to accelerate innovation in ultra-long-range lidar technology, such as its recently unveiled ETX model for L3 autonomous driving. This product, set to debut at IAA Mobility 2025, is positioned to secure international design wins and reinforce Hesai's competitive edge, as noted in a Yahoo Finance article.

Market Confidence and Strategic Partnerships

The full exercise of the over-allotment option also highlights the strength of Hesai's partnerships and market positioning. The company has secured cornerstone investments totaling US$148 million from entities like HHLR Advisors, Taikang Insurance, and Grab, with these investors collectively holding 29.76% of the shares, according to an AsianFin report. Such backing not only stabilizes the stock post-IPO but also signals long-term commitment to Hesai's vision.

Moreover, Hesai's strategic collaborations with major automakers, including BYD and Xiaomi, have enabled it to leverage economies of scale. By securing high-volume contracts, the company has reduced lidar costs while maintaining profitability-a strategy that has driven its 743.6% year-over-year growth in robotics-related deliveries, as covered by a Timothy Sykes report. These partnerships, combined with the capital raised, position Hesai to dominate both automotive and robotics markets as lidar adoption accelerates.

Challenges and Geopolitical Risks

Despite its momentum, Hesai faces headwinds. The company's recent designation as a "Chinese military company" by the U.S. Department of Defense raises concerns about its Nasdaq listing and international expansion, according to a Panabee report. Additionally, its reliance on a few major clients, such as BYD and Xiaomi, introduces concentration risks. However, the Hong Kong dual listing diversifies its investor base and provides a buffer against geopolitical volatility, while its strong liquidity position-RMB3.35 billion in net current assets as of July 2025-offers flexibility to navigate uncertainties, as highlighted in a Deloitte press release.

Conclusion: A Catalyst for Long-Term Growth

Hesai's successful execution of its over-allotment option and strategic use of proceeds demonstrate its ability to balance innovation, scalability, and market expansion. As the lidar industry enters a mass adoption phase, with Chinese automakers integrating the technology into affordable models, Hesai's leadership in R&D and manufacturing will be critical to sustaining its market share. While challenges persist, the company's financial strength, strategic partnerships, and clear capital allocation plan position it as a compelling long-term investment in the autonomous driving and robotics sectors.