On 8 May, Laopu Gold (老铺黄金, HK: 6181) announced that it would place 4.31 million new H shares (Hong Kong shares for mainland companies) with no fewer than 6 investors. The placement price is 630 HKD (80.86 USD) per share, meaning Laopu Gold could raise 2.7 billion HKD (346.55 million USD) in total should the placement be successful.
The placement would be worth 3.19% of Laopu Gold’s current total H shares and 2.56% of all its shares issued. Notably, the placement price is discounted by about 8.03% from the 7 May share price at the Hong Kong Stock Exchange (HKEX) at 685 HKD (87.92 USD) per share. Upon the news of the placement, Laopu Gold saw its shares surge another 1.9% to 698 HKD (89.58 USD) per share, bringing its market value to 117.5 billion HKD (15.08 billion USD).
Laopu announced that 80% of the funds raised during the placement would be used to develop its core business, including expansion in Mainland China, optimising current store locations and sizes, as well as boosting store sales. 20% of the new investment would be used to solidify cash flow and for daily operations.
The placement also caused some controversy among investors as the “traditional craftsmanship” jeweller had just stated that it wasn’t in need of further investment in April before launching the placement in May. The fact that the placement caused its share prices to rise prompted speculation about whether someone is buying into a long position or setting up for a short.
Pundits see the move as Laopu trying to “take territory” from luxury brands, but it is in need of the funds to do so. With queues outside its stores and share prices soaring 16 times since going public, Laopu is aiming to expand its offline presence. With most jewellery brands suffering from the high gold prices, some commentators believe a portion of the funds is to fend off the impacts of these rising prices.
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