Sunac shares plunge on builder’s second fund raising plan since July, raising dilution concerns

Shares of Sunac China Holdings slumped by more than 10 per cent on Friday after one of China’s most highly leveraged developers announced its second stock placement plan since July, raising shareholders’ concern that their interests will be diluted.

The developer, controlled by Sun Hongbin, said it would raise HK$7.82 billion (US$1 billion) through a sale of 251.5 million shares at HK$31.10 each, at a discount of close to 12 per cent to Thursday’s closing stock price, according to a filing to the Hong Kong stock exchange.

The announcement sent Sunac’s shares down 10.6 per cent to close at HK$31.55, the biggest intraday decline since July 18.

The purpose of the fundraising was to “further enlarge the company’s shareholders’ equity base, optimise the capital structure and support a healthier and sustainable development of the company,” Sunac said. “The company intends to apply the proceeds for the general working capital,” it said.

Sunac’s last shares placement was to raise HK$4.2 billion to buy 13 tourism projects from Chinese property developer Dalian Wanda. The Wanda deal was the second-largest ever in the country’s real estate market. It also brought Sunac’s spending spree to 110 billion yuan (US$16.6 billion) this year, including a 15 billion yuan capital injection into cash-strapped technology giant LeEco Group for stakes in three companies.

Last month, Sunac provided US$270 million in loans to troubled internet giant LeEco’s video streaming and television units.