FAST NEWS: Hongjiu Fruit’s Chairman pledges shares for a loan

The Latest: Fruit distributor Chongqing Hongjiu Fruit Co. Ltd. (6689.HK) announced Tuesday its controlling shareholder and chairman Deng Hongjiu pledged 23.23 million shares of the company as security for a loan totaling 96.57 million yuan ($13.4 million) from Standard Chartered Bank (China).

Looking Up: By pledging the company’s shares in exchange for a loan, Deng does not need to sell his shares, which will not affect the company’s share price, and Deng will be able to obtain cash for flexible use.

Take Note: Deng has pledged a total of 7.41% of the company’s total share capital. If he defaults, there is a chance that his position will be liquidated.

Digging Deeper: Established in 2002, Hongjiu is one of the top three fruit sellers in China, and grew rapidly during the Covid pandemic, and capable of high revenue and profit growth between 2020 and 2022. The company listed in Hong Kong in 2022, but only raised about HK$500 million ($64 million), far below the rumored target of HK$2.35 billion, due to weak sentiment. Its trading has been suspended since the end of March due to the delay in announcing last year’s results.

Market Reaction: Hongjiu’s shares traded at HK$1.74 before the suspension, plunging 95.6% from their IPO price of HK$40.

Translation by A. Au

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