8 August 2022
HG places new shares and announces subscription of shares and warrants by GCL’s founder
Hong Kong-based HG Semiconductor Ltd has announced placement of 30 million new shares at the placing price of HK$3.20 per share to no less than six placees. In addition, the group has entered into an investment agreement with Profit Act Ltd, an entity indirectly wholly owned by GCL Technology Holdings Ltd’s founder, chairman & executive director Zhu Gongshan, pursuant to which the group had conditionally agreed to allot and issue, and the strategic investor had conditionally agreed to subscribe for 60 million subscription shares and 60 million warrants.
As at 5 August, the group has 563,591,000 shares in issue. Pursuant to the placing agreement, the placing shares represent about 5.32% of the existing issued share capital of the group. After deducting the placing commission and other relevant expenses, the maximum net proceeds will amount to about HK$93.6m. The group intends to use about HK$78m of the proceeds for strengthening its R&D capabilities of semiconductor business including light-emitting diode (LED), mini-LED, fast charging, gallium nitride (GaN) devices and related products, which includes set-up of R&D centres, recruitment of R&D professionals, and the procurement of equipment and materials with an aim to develop and/or capture patent and technology. The remains of the net proceeds will be used for provision of general working capital and improving the financial position of the group.
Regarding the investment agreement with strategic investor, the shares subscription price is HK$3 per subscription share, while the subscription price of each warrant share upon exercise of the warrants will be HK$3.68. After deduction of relevant costs and expenses, the gross and net proceeds from the shares subscription and full exercising of the subscription rights attaching to the warrants will be about HK$180m and HK$220.8m, respectively.
The group proposes to use the proceeds from the shares subscription and warrants subscription for the development of GaN business.
The subscription shares and warrants shares cannot be sold or transferred for 18 months, commencing on the date of issuance. Meanwhile, the strategic investor will conduct due diligence examinations on the group regarding its business, financial, and legal aspects etc. If the results of the due diligence examinations are to the satisfaction of Zhu Gongshan, the strategic investor will participate in the shares subscription and the warrants subscription. The subscription shares and warrant shares will be allotted and issued under the shares specific mandate to be sought from the shareholders at an extraordinary general meeting (EGM).
Zhu is the founder, chairman & executive director of GCL Technology Holdings Ltd. He was a member of the 12th National Committee of the Chinese People's Political Consultative Conference (CPPCC) and is currently a member of the 12th Jiangsu Province Committee of the CPPCC, chairman of the Global Green Energy Industry Council, the vice chairman of Global Innovation Centre, chairman of the Asian Photovoltaic Industry Association, deputy director of the Green and Low Carbon Development Promotion Committee of the China Enterprise Confederation, executive VP of the Energy Storage and Electric Vehicle Branch of China Electricity Council. Over the years, Zhu has been deeply involved in the fields of electric power, photovoltaic, natural gas, new energy vehicle (NEV) operation and semiconductors. HG says that the investment agreement between the group and the strategic investor signifies the trust and support of Zhu Gongshan, giving the group a strong vote of confidence in further solidifying the business strategies and development of GaN.
The new investors follow the personal investment in HG Semiconductor by Dr Justin Chiu, executive director of CK Asset Holdings Ltd. HG reckons that the shares subscription and warrants subscription represent an opportunity to raise additional capital for expanding its GaN business, expediting the group's development. In view of the steadfast development of global new energy vehicles (coupled with global geopolitical risks and other factors), various countries fully support the development of the semiconductor industry (particularly third-generation semiconductors), so HG reckons that its GaN business has bright prospects. Leveraging the background of Zhu Gongshan as a strategic shareholder, the group expects (i) further coordination of resources in the new energy industry with the strategic investor alongside strategic synergy with the group's third-generation semiconductors (especially power chips) to form complementary industrial resources; (ii) the use of the strategic investor's financial resources and business network in the financial system to assist the group in the rapid development of production capacity and products; (iii) facilitating the group to work closely with local governments to improve the policies and support for the third-generation semiconductor industry; and (iv) that the strategic investor will share experience in operation and management to assist the group in building up its talent, operations, technology and R&D.
Looking ahead, HG will continue to proactively pursue technological innovation, refine its business strategies to capture market opportunities and accelerate growth in its GaN semiconductor business, striving to generate continuous and stable returns for its shareholders in the long run.