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The stock price of a leading fruit retailer in China surged following an announcement of a private share offering aimed at raising nearly HKD 325 million (around USD 42 million) to settle debts. Earlier today, the stock climbed as much as 33%, but closed up 20.7% at HKD 1.75 (about 23 cents USD), giving the Shenzhen-based company a market capitalization of approximately HKD 2.7 billion (roughly USD 347.5 million).
The company plans to issue 279.4 million new shares to at least six investors at HKD 1.17 each, which will represent roughly 15.4% of its expanded total share count. A securities brokerage will serve as the global coordinator and sole placement agent for this transaction.
After expenses, the fundraising is expected to net around HKD 325 million. The company intends to allocate about 61.5% of the proceeds to pay off accounts payable, 30.8% to repay bank loans, and the remaining 7.7% for general working capital.
Founded in 2001, the company operates a chain of high-end fruit stores. However, its premium market position has been under threat over the past two years due to a sluggish economy and evolving consumer preferences, leading to ongoing losses.
In the past year, the company reported a net loss of CNY 386 million (approximately USD 54.3 million), compared to a profit of CNY 362 million (around USD 50.9 million) in 2023. Revenue declined 10% to CNY 10.3 billion (about USD 1.4 billion). In the first half of this year, it recorded a net loss of CNY 342 million, with revenue dropping 22% year-over-year to CNY 4.4 billion.
The retailer’s number of stores also decreased, down by 966 last year to a total of 5,127, and further reduced to 4,386 by the end of June this year.
Management stated that in the first half, they completed streamlining their store network and that gross profit margins had returned to healthier levels. They also reported increased confidence among franchisees and expect the number of stores to begin growing again later this year.
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