Anta Sports loses US$2.8 billion market value as stock placement plan triggers worst sell-off in 6 months

Anta is arranging a back-to-back placement of new shares, while major shareholder and founder Ding Shizhong trims family stake in sportswear maker
Investors have historically reacted poorly to stock placements at deep discounts, including those by Country Garden, China Vanke and BYD

Hong Kong stock market

Jiaxing Li

Published: 1:01pm, 18 Apr 2023

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Anta Sports Products, China’s biggest sportswear maker by market value, is seeking to raise HK$11.8 billion (US$1.5 billion) from a stock placement at a discount to the market price to help pare debt. The stock slumped by the most in six months.

The company plans to issue 119 million new shares at HK$99.18 each to entities linked to its founder and controlling shareholder Ding Shizhong, according to a stock exchange filing on Tuesday, or 8.8 per cent below its last-traded price. The sale is a top-up programme, following Ding’s placement of the same stake at the same price to outside investors.

Citigroup, Morgan Stanley and UBS are arranging the transaction.

The proceeds will help refinance its outstanding debts and add working capital in the group, Anta said in the filing. The stock fell as much as 9 per cent in Hong Kong to HK$99.05, before recovering to HK$100.70. Today’s slump erased HK$21.9 billion of its market value.

Ding Shizhong, founder and chairman of Anta Sports Products, in a 2018 file picture. Photo: Edmond So

Investors have historically reacted poorly to stock placements, which are typically at sharp discounts to the market, as a sign of liquidity stress. Companies from Country Garden to China Vanke and Warren Buffett-backed EV maker BYD have made similar plans to repay older debt, as two years of pandemic have hurt domestic sales. Anta’s local competitor Li Ning raised US$1.3 billion in late 2021.

Anta loses US$3.3 billion market value as stock placement triggers sell-off

Anta’s shares have declined 3.4 per cent this year, while the Hang Seng Index gained 2.5 per cent. It has a market capitalisation of about HK$273.2 billion, compared with Li Ning’s HK$155.1 billion and Xtep International’s HK$25.4 billion.

President Xi Jinping, seen in an Arc’teryx parka during a visit to inspect Winter Olympics facilities last year. Photo: Handout

The placement could allow Anta to capitalise on any business opportunities that may arise, Daiwa analyst Carlton Lai said. He is optimistic about the company’s outlook this year as consumption in China is expected to continue to pick up, he added, benefiting its major brands including Arc’teryx, Fila and Descente.

Anta recorded a 9 per cent increase in revenue to 53.7 billion yuan (US$7.8 billion) last year, while net profit shrank 1.7 per cent to 7.6 billion yuan, according to its most-recent earnings report.

“Chinese consumers should continue to be the main driver of economic recovery in 2023,” BNP Paribas analyst Jason Lui said in a note on Monday. Companies focused on mass-market spending items for the Chinese consumer, including shopping and dining, media and entertainment, are likely outperform, he said.

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