China's third-largest property developer, China Vanke, is aiming to raise up to $1 billion through its second stock placement. The company aims to use the fresh capital to pay off its debts and invest in its businesses in order to create enough momentum to accelerate its recovery from the recent economic downturn caused by the coronavirus pandemic.
According to a filing with the Hong Kong Stock Exchange submitted on Thursday, China Vanke is planning to sell an additional 315.59 million new shares. The newly issued stocks will be priced at HK$25 each, potentially earning the company around $1.01 billion. The price of the newly issued stocks is about 4.8 percent lower than the company's current share prices, which closed at around $26.25 per share on Wednesday.
After announcing the second stock placement, China Vanke's share prices in Hong Kong climbed to about $26.85 on Thursday. Meanwhile, its share prices in Shenzhen dipped slightly by 0.4 percent to 26.73 yuan per share. The company's latest fundraising follows a similar placement in April last year when the company managed to raise around HK$7.8 billion from the sale of 263 million new shares priced at HK$29.68 each.
The developer likely opted to issue new shares to raise capital given the fact that banks are now more reluctant to issue new loans to developers due to the current economic climate. Property agency E-House noted that the outlook for China's home market remains bleak and it is highly unlikely that banks will extend their loan quotas this year due to the lingering economic impact of the pandemic.
Earlier in the week, China Vanke revealed that its home sales for the first five months 2020 had decreased by over 7.7 percent. However, the company had seen a slight uptick in property sales last month as China slowly lifted its restrictions and lockdowns.
The country's property sector was one of the hardest hit when the coronavirus pandemic started earlier in the year. The lockdowns and restrictions between January and April severely hampered the ability of developers to sell their properties. Apart from the forced closures of their showrooms, the construction of various projects was also halted to curb the spread of the disease.
Last month, China Vanke revealed plans to go into the hog raising business. The company reasoned that it was its way of diversifying its revenue sources. A post on its website revealed that the company is aiming to breed at more than 250,000 pigs annually through its new business venture.