Gome Retail sells $4.4b shares to repay debt

Beijing-based home appliances firm Gome Retail (0493) announced yesterday a plan to sell HK$4.49 billion-worth of new shares to repay debt and to expand its online and offline dual-platform businesses.

The retail chain operator plans to sell 2.28 billion new shares to a unit owned by its controlling shareholder, Wong Kwong-yu, also known as Huang Guangyu, at HK$1.97 apiece, or a 15-percent discount to Monday's close of HK$2.32.

Shares of Gome then slumped yesterday by 18.9 percent to HK$1.88.

The Wong unit will subscribe for the new shares on completion of sales of the same amount of existing shares at the same price to third party investors, Gome said in a filing to the Hong Kong stock exchange.

Wong's stake in the Hong Kong-listed company will be reduced to 45.4 percent following the deal from the current 50.2 percent. Also a former chairman of Gome, Wong was arrested in 2008 and jailed in 2010 after being sentenced to 14 years for illegal business dealings, insider trading and corporate bribery.

He was released on February 16 after his sentence was shortened.

Wong said in a management meeting two days later that he was committed to restoring GOME's market position in the course of the next 18 months.

The share sale came days after Gome, which operates more than 2,800 stores in the mainland, said its revenue for 2020 was expected to drop by 23-29 percent from 12 months earlier because of the Covid-19 pandemic. It also expects to post a net loss ranging from 6.5 billion yuan (HK$7.79 billion) to 7.2 billion yuan compared with a 2.59 billion yuan loss in 2019.