The mainland’s second-largest sportswear brand, Li-Ning, will raise up to HK$1.7 billion through an offer of securities on the basis of five shares for every 12 existing shares, according to a statement to the Hong Kong stock exchange on Wednesday morning.
Shares of the company dipped as much as 11 per cent in morning trading on Wednesday and closed the morning session at HK$3.06, down 8.1 per cent on its last closing price. Trading of Li-Ning had been halted since Friday. The Hang Seng Index inched down 0.2 per cent in the morning.
Next year will mark the beginning of the group’s growth phase
The offer securities are priced of HK$2.60 each, or a discount of 32.3 per cent to the average closing price of HK$3.84 over the previous 10 trading days.
The company said it would use the net proceeds as working capital “to support its next stage of growth and to optimize its capital structure”, without giving details.
“The optimization of the group’s network has resulted in various distributor and sub-distributor partners seeing improved profitability,” the filing said. “Next year will mark the beginning of the group’s growth phase.”
The brand, founded by Olympic gymnast Li Ning, has been working on a transformation from a wholesale model to a direct retail one and redesigning its products after suffering from overexpansion and poor brand differentiation.
It reported a loss for the first-half of 586 million yuan (HK$737.5 million), compared with a loss of 184 million yuan in the same period last year.
In contrast, rival sportswear brands Anta and Peak Sports both reported high double-digit increases in profit.
Fifty-year-old Li, who won three gold medals at the 1984 Los Angeles games, founded the company when he was 27.
In August the sportswear brand lost out to Anta in securing a sponsorship deal with the Chinese gymnastics team.
The company’s troubles started in 2010, when a plan initiated by former chief executive Zhang Zhiyong to focus on manufacturing high-end products led to overstocked warehouses and huge losses. Consumers did not buy Li-Ning’s strategy of quality products with higher prices, while, at the same time it surrendered the low-to-middle market to its rivals.
Last month Korean-American Jin-goo Kim stepped down as interim chief executive and Li took over daily operations before a new chief executive is appointed.
Li Ning’s share price has halved this year, while the Hang Seng Index has lost 2.8 per cent.