Fluorite's $6B Share Placement Unlocks, 17 Institutions Including Xingquan, Morgan Stanley "Deeply Trapped"
Once a darling of many institutions, Forte is now falling from grace. On January 29th, Forte's stock closed down by 7.52%, and since last August, its share price has shrunk by nearly 40%, which has also "severely injured" the institutions involved in Forte's 6 billion yuan private placement. In August last year, Forte's nearly 6 billion yuan private placement was a sensation, with institutions such as Morgan Stanley, Caitong Fund, and GF Fund rushing in. Half a year later, the restricted shares held by these institutions will be unlocked on February 1st. However, since the completion of the private placement, Forte's stock price has been on a downward trend, with all 17 institutions in a paper loss.
It should be noted that Forte, which has a less than satisfactory self-funding capability, has repeatedly reached out to the market for money since its listing, involving funds of about 14.1 billion yuan, far exceeding its net profit.
The performance of Forte in the secondary market in the past half year has been a great disappointment to many investors.
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On January 29th, Forte's stock closed down by 7.52%. Looking at the longer timeline, it has fallen by more than 37% since last August. This has left 17 institutions, including Morgan Stanley, China Life, and Xingquan, who participated in Forte's 6 billion yuan private placement, extremely frustrated.
Now, the restricted shares held by the aforementioned institutions will be unlocked on February 1st, involving a market value of about 5 billion yuan.
It is worth mentioning that this 6 billion yuan private placement is higher than the total net profit of Forte in the past three years. Overall, since 2019, it has conducted 5 financings, involving funds of over 14.1 billion yuan. However, Forte, which frequently reaches out to the market for money, is somewhat stingy in terms of dividends, having paid out a total of 1.643 billion yuan since its listing.
17 institutions are deeply entangled.
On January 26th, the photovoltaic glass leader Forte issued an announcement on the listing and circulation of restricted shares, stating that it conducted a 6 billion yuan private placement in July last year, and these shares will be unlocked on February 1st. The number of shares to be listed and circulated this time is 204 million. If calculated based on the closing price of the listed company on the 26th at 23.41 yuan per share, the market value of this unlocking is about 4.78 billion yuan.
Among the 17 institutions participating in the private placement, Caitong Fund, Silver Hua Fund, UBS AG, GOLDMAN SACHS INTERNATIONAL, Nord Fund, Ningbo Junhe Tongxin Equity Investment Partnership (Limited Partnership), Zhuque Fund, and GF Fund were allocated a higher number, respectively 11.18 million shares, 17.36 million shares, 28.18 million shares, 12.71 million shares, 22.89 million shares, 10.22 million shares, 14.38 million shares, and 23.48 million shares.
At that time, the subscription price of the private placement was 29.35 yuan per share, so the allocated amount for the above institutions was 328 million yuan, 510 million yuan, 827 million yuan, 373 million yuan, 672 million yuan, 300 million yuan, 423 million yuan, and 689 million yuan, respectively.
At the same time, two insurance funds also participated in the private placement, namely China Life Asset and Pacific Life Insurance's products, which secured 6.81 million shares and 6.51 million shares respectively with 200 million yuan and 190 million yuan.Additionally, private equity firm Ruiyang Investment, with a hundred billion in assets, along with Huatai Asset Management and six other institutions, have also deployed their products to subscribe for shares.
However, the performance of Fulingate, which was sought after by a multitude of funds, has been lackluster in the secondary market. Data from Choice shows that from August 1, 2023, to January 29, 2024, the stock price fluctuation of Fulingate was -37.66% (on a pre-split basis).
The subscription price of 29.35 yuan per share has already shrunk by 26% compared to the current stock price of 21.65 yuan per share. This means that, without considering dividends, the market value held by the 17 institutions has already shrunk by 26%.
Among them, UBS AG, Ruiyang Investment, and GF Fund are loyal followers of Fulingate. Data shows that as of last year's third quarter, the former became the eighth largest circulating shareholder of the listed company with 28.57 million new shares; Ruiyang Investment increased its holdings by 1 million shares in that quarter, bringing its total to 28.001 million.
Eight funds under GF Fund heavily invested in Fulingate in the third quarter of last year, with a combined holding of 86.93 million shares, and the holding value as of the third quarter was 2.46 billion yuan.
Raised 14.1 billion yuan in 5 years
Fulingate, which is revered by various funds as a "guest of honor," has average self-financing capabilities. However, since its listing, it has been keen on "ingeniously" asking the market for money.
According to the data, since its listing in February 2019, Fulingate has conducted a total of five rounds of financing, involving methods such as convertible bonds and private placements. Specifically, it raised a net amount of funds (in yuan) of 254 million, 1.441 billion, 2.483 billion, 3.977 billion, and 5.965 billion on January 2019, May 2020, mid-January 2021, May 2022, and August 1, 2023, respectively, with a total amount exceeding 14.1 billion yuan.
Looking at the use of its fundraising, most of it has been used for the construction of photovoltaic projects.
It is worth mentioning that although its fundraising amount is not eye-catching, Fulingate's fundraising amount almost every time exceeds the total sum of net profits for that year.Data indicates that from 2019 to 2022, the net profits of Fuling were 717 million yuan, 1.629 billion yuan, 2.12 billion yuan, and 2.123 billion yuan, respectively. It can be observed that, except for the year 2020, the total amount of funds raised by Fuling each year exceeded its annual net profit.
Moreover, its 6 billion yuan private placement in August 2023 was close to the total net profit of 5.872 billion yuan over the past three years.
However, Fuling, which frequently sought funds from the market, was extremely stingy when it came to dividends. Data from Tonghuashun shows that since its listing on the A-share market, it has cumulatively paid out 1.643 billion yuan in dividends, of which 1.303 billion yuan was paid out in A-shares and 340 million yuan in H-shares. This dividend amount is even less than a fraction of the 14 billion yuan financing amount.
Fuling's stingy dividend behavior is in stark contrast to its peers in the photovoltaic industry. According to Choice data, Fuling's current dividend payout ratio is 1.02%, and its dividend payout ratio is 18.39%. During the same period, the dividend payout ratios of its peers were much higher than that of Fuling. For example, Shuangliang Energy Saving, Hemai Shares, and Tongwei Shares all exceeded 50%, while Yuneng Technology and Yamatong also exceeded 46%.
Caught in the "Dilemma" of Increasing Revenue but Not Profits
Fuling's regular operation has been to seek funds from the market and, after obtaining financing, to go against the trend and build photovoltaic projects.
However, overcapacity in the photovoltaic industry is already common knowledge in the industry. Financial analysis institutions such as securities firms generally believe that the photovoltaic manufacturing industry has shown signs of overcapacity, which has affected the valuation of related companies.
Under the background of overcapacity, Fuling, which is subject to others in terms of raw materials and expands production against the trend, has been backfired. In addition to the secondary market, this is particularly evident in performance. Data shows that from 2020 to 2022, its revenue was 6.26 billion yuan, 8.713 billion yuan, and 15.461 billion yuan, respectively, with year-on-year changes of 30.24%, 39.18%, and 77.44%, respectively; the corresponding net profit attributable to the parent company was 1.629 billion yuan, 2.12 billion yuan, and 2.123 billion yuan, with year-on-year changes of 127.09%, 30.15%, and 0.13%, respectively. It can be seen that the profit in 2022 was almost stagnant.
In its annual report, it pointed out that under the relatively stable price of photovoltaic glass, due to the continuous rise in the prices of main raw materials and fuels, the cost kept rising, and the company's profit was at a relatively low position.
It is reported that the main raw materials for photovoltaic glass are soda ash and quartz sand. According to data from Zhuochuang Information, the price of soda ash has long been at a high level, with the average price at a ten-year historical high. In 2022, the average price of domestic heavy soda ash at the terminal was 2,859 yuan/ton, a year-on-year increase of 16.6%.The rise in raw material prices has led to a significant decline in gross margins. Data shows that in 2022, its gross margin decreased by 12.39 percentage points year-on-year.
This situation improved somewhat in the second quarter of 2023. Flate Glass noted in its semi-annual report that as the prices of major raw materials and fuel moderately fell in the second quarter, the profit level in the second quarter slightly improved.
While costs continued to rise, demand fell. According to SMM data, since October, domestic module production has shown a downward trend. With the continuous increase in module inventory and the continuous decrease in profits, the start-up rate of most modules has continued to decrease, and purchases of photovoltaic glass and the like have also decreased. Although there is still support from the cost side for photovoltaic glass, prices have still been significantly reduced.
Caixin Securities pointed out in its research report that by the end of 2023, the price of photovoltaic modules fell to 1 yuan/w, and the profit space of the entire industry chain was compressed to the break-even line. It is expected that in 2024, the demand side will increase by about 10%-20%, and the profit space of the industry chain in 2024 will seek the bottom in the low fluctuation, during which some planned production capacity will be postponed or exited.