By Colleen Howe
BEIJING (Reuters) – Shares of top Chinese polysilicon producer GCL Technology shot higher on Tuesday as the market cheered a company fund-raising plan that investors see as a step towards cutting chronic overcapacity in the industry.
GCL will use an estimated HK$3.505 billion ($450.66 million) in proceeds from a share sale for “establishing a capital reserve for the reform of the supply-side to promote the structural adjustment of polysilicon production capacity”, as well as for growing other business lines, it said in a Hong Kong stock exchange filing earlier in the day.
Hong Kong-listed GCL’s shares closed up 3.95% at HK$1.31 ($0.17) per share, after initially gaining more than 5%.
In late July, GCL detailed plans by China’s largest polysilicon producers to create a 50 billion yuan ($7 billion) fund to acquire and shut at least 1 million metric tons of lower-quality polysilicon capacity, in a bid to pare back overcapacity in the industry and boost prices.
“It is a first answer to the question of what means could be used to finance the envisaged $7 billion fund, and it is a confirmation that the players are going forward with implementing the plan,” said Johannes Bernreuter, founder of industry consultancy Bernreuter Research.
But he said even with that funding in hand “it would still be a long way to go” to reach $7 billion.
Some sell-side investors reacted negatively to the news that GCL was selling shares at a discount, suggesting a lack of confidence that its share price would recover in future, Jefferies analyst Alan Lau told Reuters.
GCL agreed to sell 4.7 billion shares at HK$1.15 per share to hedge fund Infini Capital Management, it said in the filing.
GCL said it will also put some of the capital into its silane gas business. It said demand for silane gas is growing because of the transition to back-contact solar cells, which have all electrical contacts on the rear side of the cell, so the entire front surface of the cell can be exposed to sunlight.
The company will also raise another HK$1.9 billion for working capital purposes and loan repayment.
($1 = 7.7775 Hong Kong dollars)
(Reporting by Colleen Howe; Editing by Rashmi Aich and Kim Coghill)
