Meanwhile In China, A Bankrupt Solar Firm Just Sold $117 Million In Shares

Meanwhile In China, A Bankrupt Solar Firm Just Sold $117 Million In Shares

In what at the time was a historic event, taking advantage of the early signs of retail euphoria, back in June bankrupt Hertz tried and almost succeeded in selling shares while in bankruptcy. Only the last minute intervention of a bankruptcy judge prevented what would have been a $1 billion “at the money” offering to Robinhood traders.

But where Hertz failed a Chinese company has succeeded.

Bloomberg reports that a Chinese solar power plant firm raised $117.4 million overnight selling 2 billion new shares in Hong Kong — an unremarkable placement at first sight… except that GCL New Energy Holdings is technically bankrupt, having defaulted on a $500 million bond just last week.

Its stock predictably fell on Wednesday after the share placement, but it’s still up almost 54% this year. In fact, it has risen 49% since announcing the default on Feb. 1.

The fact that a company in default was able to successfully sell new shares is perhaps not all that surprising as stocks continue to hit new highs on expectations of more stimulus. The rally has prompted companies and shareholders to sell shares, with equity sales and initial public offerings having a record start to the year.

GCL New Energy is among renewable power developers that have been hurt by China’s government delaying subsidy payments. The firm’s accounts and notes receivable rose to more than 4.5 billion yuan ($699 million) as of June 30, up from 1.9 billion yuan four years earlier.

And while the company had been selling renewable plants to help pay down debt, but it wasn’t enough to avoid the default earlier this month. As of June, the company had net current liabilities of 6.5 billion yuan, which cast doubt about its ability to continue as a going concern, according to a statement on Dec. 23.

That’s when an army of new shareholders stepped in, eager to provide the company with much needed liquidity.

And while Americans watch in disbelief as retail traders take worthless companies orders of magnitude higher, in China this is a routine occurrence: when short-video company Kuaishou Technology went public this month, investors put in hundreds of billions of dollars of orders as “investors, both retail and institutional, have flocked to share offerings in an effort to put idle cash to work given ultra-low interest rates.”

And while we now know that Ken Griffin, Citadel’s billionaire founder, is expected to testify next week at a House hearing on wild market swings in shares of GameStop and other stocks, we doubt that the real perpetrator of the current bout of market insanity – the Chairman of the Fed – will be present.

Tyler Durden
Wed, 02/10/2021 – 22:05

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