Li Ning Falls on Plan to Sell Convertible Securities
Li Ning Co. fell by a record after the Chinese sportswear company said it plans to raise as much as HK$1.87 billion ($241 million) offering convertible securities to fund efforts to revive its brand.
Li Ning fell as much as 16 percent to HK$5.20, headed for the biggest decline since it started trading in June 2004. Qualifying stockholders will be offered one convertible security for every two shares, the company said in a statement to Hong Kong’s stock exchange today.
Each security can be converted into one share at HK$3.50 each, 44 percent lower than the stock’s last closing price before the announcement, Li Ning said. The retailer in December predicted a “substantial” full-year loss because of costs for a plan to revive growth, after reporting an 85 percent drop in first-half profit.
“The steep discount the company is willing to offer reflects its urgent need for capital to support the transformation plan, and the recovery could be slower than expected,” Jerry Peng, a Shenzhen-based analyst at Guotai Junan Securities Co. Ltd. said by phone.
Li Ning shares traded at HK$6.21 before the stock was suspended yesterday for the announcement. The stock dropped 14 percent to HK$5.34 at 10:40 a.m. in Hong Kong. The city’s benchmark Hang Seng Index fell 0.1 percent.
Li Ning has said it plans to boost sales by investing in marketing, clearing old inventory and “improving product freshness” as competition from Nike Inc. (NKE), Adidas AG, and Anta Sports Products Ltd. (2020) increases. The efforts, which will include buying back inventory, will cost between 1.4 billion yuan ($225 million) and 1.8 billion yuan, the retailer said last month.
Li Ning’s founder in October sold a 25 percent direct stake in the sportswear retailer to Viva China Holdings Ltd. (8032), a company he partially controls.
In January last year, Li Ning sold 750 million yuan of convertible bonds to TPG Capital and Singapore’s sovereign fund to raise money for more stores and product development.
Viva China will underwrite 60 percent of the securities announced today, with TPG underwriting 40 percent. TPG, Viva China and Singapore’s sovereign fund GIC have agreed to subscribe to the convertible securities.
Gymnast Li Ning was the final torchbearer at the opening ceremony of the 2008 Beijing Olympic Games. He won three gold, two silver and one bronze medals in the 23rd Los Angeles Olympic Games in 1984, and founded the company after retiring from athletics, according to the retailer’s annual report.
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