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Tianqi Lithium Scraps Share Sale After Exchange Queries Plan

Tianqi Lithium Scraps Share Sale After Exchange Questions Plan

Tianqi Lithium Corp. halted a private share-sale plan after a Chinese exchange queried the deal.

The company said Sunday it had terminated the plan, announced Friday, that would see it raise as much as 15.9 billion yuan ($2.5 billion) by issuing stock to controlling shareholder Chengdu Tianqi Industry Group Co. at 35.94 yuan per share -- about 40% below its last closing price. Tianqi said it scrapped the deal to avoid short-swing trading and protect the interests of smaller shareholders.

The proposal for Chengdu Tianqi to buy shares comes the same month it said it would reduce its stake, along with other holders, by up to 4% over a six-month period starting Jan. 29. The company had also completed a 6% share-sale plan announced last year.

Over the weekend, the Shenzhen exchange queried Friday’s announcement, asking whether Chengdu Tianqi’s subscription to the private-placement plan after earlier reducing its stake constitutes a short-term transaction and if it hurts the interests of small and medium shareholders.

The bourse noted Tianqi Lithium’s share price had tripled over the past 60 trading days and asked the company whether any insider information had been leaked, as well as if the plan is feasible. The stock was 4% lower on Monday.

Tianqi’s Woes

While it wasn’t a surprise for Tianqi to conduct a private placement, the amount and timing were unexpected, Daiwa Capital Markets Hong Kong Ltd. analysts Dennis Ip and Leo Ho wrote in a report. The announcement runs a high chance of constituting short-swing trades despite not directly breaching listing rules, they wrote.

“While we disagree with this view given Tianqi’s distinctive financial condition, we do understand that the regulatory body may have reservations on approving such a private placement given it could be a ‘bad precedent’ that encourages major shareholders of other listed companies to follow and ‘buy low, sell high’,” they said.

Shares had surged in the latter part of last year on signs Tianqi’s financial pressures, which stem from a plunge in lithium prices following a highly leveraged acquisition of a stake at Soc. Quimica y Minera de Chile SA in 2018, were easing. SQM’s Chief Executive Officer Ricardo Ramos said in an interview released Sunday he has “no doubt” Tianqi will solve any problems they may have.

Tianqi said in December its plans to sell a stake in the Greenbushes mine to Australia’s IGO Ltd., and followed up with an agreement with lenders to delay some loan repayments, including a $1.88 billion portion that was due last November.

Cancellation of the share sale won’t impact the company’s business operation and development, Tianqi said in the statement on Sunday. It will evaluate and continue to carry out refinancing in the future, given its relatively high debt-to-asset ratio.

©2021 Bloomberg L.P.

With assistance from Bloomberg