CC Land shares tumble after unveiling HK$2.6b rights issue in wake of London property acquisition
Shares of Chinese property developer CC Land Holdings slumped nearly 9 per cent on Wednesday after it announced plans to raise HK$2.6 billion (US$335 million) through a rights issue.
At midday in Hong Kong, the stock was quoted at HK$2.06, down 8.9 per cent from Tuesday, reflecting its biggest intraday drop so far this year. It slightly recovered to end trading at HK$2.10, down 7.1 per cent for the day.
The company announced it bought a 100 per cent stake in London’s landmark Leadenhall Building, also known as “The Cheesegrater”, in early March for £1.135 billion (US$1.4 billion).
On Tuesday evening the Hong Kong-listed firm said it plans to raise between HK$2.58 billion to HK$2.65 billion through a rights issue of 1.29 billion to 1.33 billion shares, offering one new share for every two existing shares.
The new shares will be priced at HK$2 per share, a discount of about 12 per cent from its closing price on Tuesday.
“The rights issue is currently the most preferred means for the group to replenish its general working capital after the recent completion of the acquisition in cash of the entire interest of a property located in London,” Peter Lam How-mun, deputy chairman and managing director of CC Land said in a statement to the Hong Kong stock exchange.
The market capitalization of the Chongqing-based developer, controlled by Chinese tycoon Cheung Chung-kiu, is HK$5.3 billion yuan.
“Certainly minor shareholders are unhappy with the rights issue plan, being forced to take money out of their own pocket to fund the London building transactions,” said Alex Wong Kwok-ying, director at Ample Finance Group.
Wong added that by tapping the rights issue, Cheung’s stake in CC Land will not be diluted. Cheung holds 60 per cent of the company’s shares.
Earlier this month CC Land said it expected to incur a loss for 2016 because of a slowdown in home sales in mainland China.