Loss-Making Huayi Brothers Surges After Securing New Funds From Alibaba, Tencent
Liao Shumin
DATE:  Apr 29 2020
/ SOURCE:  Yicai
Loss-Making Huayi Brothers Surges After Securing New Funds From Alibaba, Tencent Loss-Making Huayi Brothers Surges After Securing New Funds From Alibaba, Tencent

(Yicai Global) April 29 -- Huayi Brothers Media's stock price rose by the daily maximum after the unprofitable Chinese entertainment firm said it will raise nearly CNY2.3 billion (USD324.9 million) in a private placement of new shares with investors such as long-time backers Alibaba and Tencent.

The Beijing-based company’s shares [SHE: 300027] surged 10 percent today to CNY3.94 (56 US cents) each, the highest since mid-March. They are still a third down on a 52-week high of CNY5.90 reached last June.

Nine firms, including Alibaba Pictures Group, Tencent Computer System, Sunshine Life Insurance, and Xiangshan Dacheng Tianxia Culture Development, will subscribe to no more than 820 million shares at CNY2.78 apiece, the film and television producer said in a statement yesterday. That is more than 20 percent less than yesterday's closing price of CNY3.60.

Huayi Brothers lost CNY143 million (USD20.2 million) in the first quarter, according to its earnings report published yesterday. If this year turns out unprofitable, the company risks a delisting from the Shenzhen Stock Exchange. Its loss almost quadrupled to CNY4 billion last year.

The firm's strategic partners are still firmly optimistic about its film, TV, and entertainment business after 26 years of development despite knowledge of its difficulties, said Chairman Wang Zhongjun.

After the new shares are issued, the combined stake of Wang and his brother Wang Zhonglei will fall to 22 percent from nearly 29 percent, but together the founders will remain the biggest shareholder.

Despite taking part in the placement, Alibaba Pictures's portion of the outstanding stock will decrease to 7.2 percent from 8 percent, and that of Tencent Computer to 7.1 percent from 7.9 percent. Xiangshan Dacheng Tianxia's stake will be 4.6 percent.

In addition, Tencent and Huayi Brothers will explore intellectual property licensing of movies, games, and literature, as well as creating short videos at home and abroad, the statement said.

Alibaba's video platform Youku has collaborated with Huayi Brothers over the years by buying intellectual property rights from the latter and the Hangzhou-based tech giant provided the entertainment firm with a CNY700 million (USD98.9 million) loan last year.

Editor: Emmi Laine 

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Keywords:   Huayi Brothers Media Corporation,Alibaba,Tecent