FAST NEWS: Hongjiu Fruit raises $73 million in new non-listed share placement

The latest: Recently listed fruit seller Chongqing Hongjiu Fruit Co. Ltd. (6689.HK) announced Tuesday it will issue up to 30.48 million domestic unlisted ordinary shares to four Chinese investors, representing about 2.13% of its enlarged total share capital.

Looking up: The company expects to raise 500 million yuan ($73 million) from the placement, which it will use to strengthen its fruit supply chain and replenish its liquidity, which may help accelerate its business expansion.

Take Note: The issue price of the new shares is 16.4 yuan, or about HK$18.74, representing a 29.3% discount to the stock’s closing price of HK$26.50 on the previous trading day. The discount owes to the fact that the new shares won’t have public trading status, and thus have lower liquidity. The subscribers plan to sell the shares after a planned future listing by Hongjiu on China’s A-share market, which may take a long period of time to complete, making the investment risk relatively higher.

Digging Deeper: Established in October 2002, Hongjiu is one of the top three fruit sellers in China, focused on high value fruit products. The company raised about HK$500 million ($64 million) in its IPO last year, far below the market’s rumored fundraising target of HK$2.35 billion, due to weak market sentiment. Still, the offering made Hongjiu the first Chinese fruit distributor to launch on the Hong Kong exchange. The company’s business has been growing rapidly over the last three years during the pandemic, with revenue and non-GAAP adjusted profit jumping 46.7% and 33.5% last year, respectively.

Market Reaction: Hongjiu shares fell on Thursday, closing down 2.3% to HK$25.90 at the midday break. The stock now trades 35.3% below its IPO price of HK$40.

Translation by Jony Ho

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