FAST NEWS: CMGE Chairman Settles With Creditor on Pledged Shares

The latest: Game operator CMGE Technology Group Ltd. (0302.HK) reported on Wednesday its chairman and largest shareholder Xiao Jian pledged about 90 million shares, equivalent to 3.25% of the company’s total, as collateral for a loan from Bear Stearns in 2020. When Xiao tried to repay the money in early July 2021, he was accused of breaching the agreement and forfeited his pledged shares.

Looking up: Xiao has indicated that he will increase his shareholding in CMGE by HK$30 million ($3.8 million) or more after the end of a current black-out period pending release of the company’s 2022 results.

Take Note: Xiao successfully applied to the Hong Kong High Court for an injunction restraining Bear Stearns from selling the underlying shares, but the order was difficult to enforce overseas and it is believed the shares may have been sold already. As a result, Xiao reached a recent settlement with Bear Stearns, with the pledged shares reverting to Bear Stearns, and Xiao being released from his obligation to repay the loan.

Digging Deeper: Founded in 2009, CMGE is a global game operator that was listed in Hong Kong in 2019. The company’s revenue has risen steadily since its IPO and reached record highs for three consecutive years through 2021. But the figure suddenly plunged 43.5% in the first half of last year, as the company posted a net loss of 21.9 million yuan ($3.2 million). Driving the loss was a 70% increase in administrative expenses, a decline in gross billings for some games, and delays in the launch of new games after China temporarily stopped issuing new licenses.

Market Reaction: CMGE shares surged on Thursday to close up 8.3% at HK$2.21 by the midday break. The stock now trades in the middle of its 52-week range.

Translation by Jony Ho

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