BOE Raises $3.14b

BOE Raises $3.14b
​

China’s largest panel producer BOE (200725.CH) announced that it had placed 3.65b shares of its common stock with a group of private investors, raising $3.14b US.  The share (new) were priced at 5.75 yuan, with bids ranging from 5.64 to 6.3 yuan and carry a 6 month lockup for all purchasers except the largest buyer, who agreed to an 18 month lockup.  The new shares increased the total company shares by 10.5% to 38.45b shares for a market value of $46.037b US at the subscription price.
As previously stated the funds will be used for the following:

• Acquire 24.06% of Wuhan BOE Optoelectronics, the holding company for the company’s Gen 10.5 fab in Wuhan
• Continue the building and expansion of the company’s Gen 6 OLED fab in Chongqing and increase holding company capital
• Fund the company’s 12” silicon OLED micro-display project
• Add capital to the company’s Hospital project in Chengdu
• Repay Loan from Fuzhou Urban Investment Group
• Increase overall capital structure to avoid debt ratio issues

We were curious as to who purchased the shares, given the size of the deal.  The table below shows the deal participants, their business and the share of the offering that they subscribed for:

While the two directly state owned entities took over 22% of the deal, we were more interested in BOE’s top 10 shareholder list, both from any change in control (none) and the composition of the holders.  As can be seen in the table below, the only non-state owned holder of BOE shares (top 10) is the Hong Kong Stock Exchange (388.HK), although while still state owned, the Central Bank of Norway is certainly not owned by the Chinese government, as are all of the other entities.

This deal has been weighing on BOE shares for some time, with considerable pressure from individual shareholders who were concerned that not only was the deal depressing the stock but that private shareholders would be offered stock at a substantial discount, a practice not uncommon with Chinese technology companies.  Perhaps with the deal out of the way, some of that pressure will be off the stock, however the lockup is relatively short and the prospects for the LCD display segment have likely peaked or are near so. 
BOE continues to push to gain traction with Apple (AAPL) in the OLED space, and while they still have yet to become a primary supplier, we expect much of this deal promotion was based on that potential.  Apple tends to keep its actual suppliers from disclosing orders, more so lately given the number of ‘leaks’ that seem to appear weekly, but there is a considerable amount of time before Apple will have to commit to BOE for the next generation iPhone, which leaves plenty of time for rumors to ebb and flow as to BOE’s prospects.

BOE A Shares - YTD Stock Price Chart - Source_ Marketwatch