HK online broker Futu raises US$1.24b to cash in on margin lending boom: sources

[HONG KONG] Hong Kong-based online brokerage Futu Holdings has raised US$1.24 billion by selling new shares at US$130 a piece to help expand its margin financing business, two people with direct knowledge of the matter told Reuters.

The price was set on Wednesday in Hong Kong, the people said, after the stock collapsed 23.4 per cent in New York Tuesday trade as investors digested the deal.

The people declined to be identified as the information was not public. Futu declined to comment.

Futu previously said it would sell 9.5 million American Depository Shares and spend the proceeds on increasing its margin financing capability, international expansion and new licence applications.

Margin lending, or the amount brokers can lend to individual investors to buy shares, has been a big business in Hong Kong in recent years as a large number of equity floats lured retail buyers.

The most recent data from the Securities and Futures Commission showed there were 1.5 million active margin investors in Hong Kong at the end of 2020, up 144 per cent from a year earlier.

Futu's shares were trading at US$177.92 before the deal, which would have raised Futu about US$1.7 billion had the shares priced around that level.

However, the 23.4 per cent plunge on Tuesday followed a 16 per cent climb on Monday, which dampened the price investors were willing to pay for new stock.

The capital raising was Futu's third in less than two years and Citi analysts estimated the deal would be 3.3 per cent dilutive for Futu's earnings per ADS.

Futu, backed by Chinese gaming and social media leader Tencent Holdings, listed on the New York exchange in 2019.

REUTERS