Nearly a year after the announcement of the rights offering plan, Hongta Securities finally got the approval of the CSRC. The company has seen a net cash outflow of more than 1 billion yuan in the first three quarters of 2020, with cash payments to repay debt surging more than 150 percent year on year. Before the rights offering was approved, the CSRC asked the company to provide additional explanations on the risks of the Yongmei and Yuenghua bonds it invested
Tian Wenhui, a researcher at Investment Times
Hongta Securities Co., Ltd. (hereinafter referred to as Hongta Securities, 601236.SH) has been approved by the China Securities Regulatory Commission (CSRC) nearly a year after it announced its rights offering plan of no more than 8 billion yuan.
According to Hongta Securities announcement, it received the approval document issued by the China Securities Regulatory Commission in the early part of March this year, and received the administrative license application acceptance form issued by the Commission on December 11, 2020. On March 27, 2020, the board of directors of Hongta Securities deliberated and approved the rights offering plan. China National Tobacco Corporation approved the rights offering plan on September 3, 2020. On September 21, 2020, the rights offering plan was approved by the interim shareholders’ meeting of Hongta Securities.
Investment Times researchers noted that the pressure on Hongta Securities to repay its debt has increased in 2020 as it awaits approval of its rights offering plan. In the third quarter of 2020, the company showed a net cash flow outflow in the first three quarters of the year, with a net increase of -1.073 billion yuan in cash and cash equivalents, among which the net cash flow generated by financing activities was -3.659 billion yuan. In fund-raising activities, the cash received from bond issuance was 3.976 billion yuan, down 26.42 percent year-on-year, while the cash paid for debt repayment was 9.658 billion yuan, up 156.12 percent year-on-year.
Before the rights offering plan was approved, the CSRC had asked Hongta Securities to further disclose or explain various issues, including the risks caused by the default of the relevant bonds and whether the impairment provisions of the stock pledge business were sufficient. As of the end of 2020, Hongta Securities needs to confirm a loss of 327 million yuan from changes in fair value for its four Yongmei bonds and Yuenghua bonds.
Before the plan was approved, Hongta Securities Chairman also changed. In the chairman before the change in 2020, Hongta Securities has been the regulatory authorities to take regulatory measures.
In terms of A-share performance, Hongta Securities closed at 13.66 yuan on March 22, down more than 20% this year.
article links：Hongta Securities 8 billion rights offering approved
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