BEIJING • Chinese delivery giant Meituan has raised US$9.98 billion (S$13.3 billion) from a record top-up placement and a convertible bond sale as it doubles down on efforts to fight the likes of Alibaba in newer areas such as online groceries.
The nation's third-largest Internet company has sold 187 million shares in a top-up placement at HK$273.8 each, near the top end of its marketed range, and also raised US$400 million from shareholder Tencent, according to terms of the deal obtained by Bloomberg News.
The US$7 billion new stock issuance is the largest such sale by a Hong Kong-listed company, data compiled by Bloomberg shows. Meituan has also sold US$2.98 billion in zero-coupon convertible bonds.
Meituan's shares were volatile yesterday, up 1.2 per cent in mid-morning trading in Hong Kong, after having fallen as much as 1.8 per cent earlier.
The placement price represents a discount of 5.3 per cent to the stock's closing price on Monday. The convertible bonds are divided in two tranches - US$1.48 billion six-year notes and US$1.5 billion seven-year paper, the terms showed.
"There were some rumours about the placement last week, now that overhang is gone," said Mr Steven Leung, executive director at UOB Kay Hian (Hong Kong). "Demand for the placement was strong near the top end of the range. I heard the issue was taken up very quickly."
The stock and bond sales come as Meituan grapples with the cost of competing against the likes of Alibaba and Pinduoduo in newer spheres such as community e-commerce and online groceries. The company has warned it will remain in the red for several more quarters despite record revenues as it spends heavily on new initiatives.
Meituan intends to use the proceeds for technology innovations, including the research and development of autonomous delivery vehicles, drone delivery and other cutting-edge technology, as well as general corporate purposes, the terms showed.
"It makes sense to raise money to make more of a shift into autonomous delivery, seek to delve into more technology-focused areas especially under the backdrop of the anti-monopoly" drive, said Northeast Securities analyst Zhou Luyun. "The pricing shows that the market buys this blueprint."
Community buying is one of Meituan's chief expansion areas, where buyers in the same neighbourhood enjoy bulk discounts on fresh produce. But the firm faces entrenched competition from other Internet giants.
All three main rating agencies lowered their outlook on Meituan after it reported earnings last month, with S&P Global Ratings and Moody's Investors Service saying that its large investments in community e-commerce would come at a heavy cost, generate negative free cash flow and dampen earnings.
"After this placement, some short-term investors could sell the stock and shares could trade in a range of HK$250 to HK$300 for a while," said Mr Paul Pong, managing director at Pegasus Fund Managers. "In the medium to longer term, online platform operators like Meituan and Tencent still have a solid growth outlook."
Tencent is delving deeper into Meituan at a time global investors are souring on the Chinese tech sector due to heightened regulatory scrutiny. Meituan had lost some US$123 billion of its value from a Feb 17 high through Monday, pummelled by fears that Beijing's crackdown on Mr Jack Ma's empire will expand beyond Alibaba and Ant Group to engulf other sector leaders like Tencent and Meituan.
"They are going into new areas including group purchases and those need a lot of capital and they need a war chest to compete," said Kamet Capital Partners chief investment officer Kerry Goh. "Valuations are still pretty decent compared with a year ago."
BLOOMBERG
