Huobi Exchange Looks to Buy Pantronics Holdings In $77 Million Backdoor Listing Deal
Reportedly, Chinese crypto exchange giant, Huobi, has acquired majority stocks in Hong Kong-based Pantronics Holdings Ltd. through a backdoor listing deal.
A backdoor listing sometimes referred to as a reverse takeover, reverse merger, or reverse initial public offering (IPO), occurs when a privately held company that may not qualify for the public offering process purchases a publicly traded company. By undertaking a backdoor listing, the private company avoids the public offering process and gains automatic inclusion on a stock exchange.
Following the acquisition, the buyer may merge both companies' operations or, alternatively, create a shell corporation that allows the two companies to continue operations independent of each other.
Huobi procured 73.73% of Pantronics Holdings Ltd., which makes the crypto exchange the real controller of the power-related electrical and electronic products manufacturer. Pantronics suspended trading its shares on the Main Board of the Hong Kong Stock Exchange (HKEx) on August 22nd due to a possible offer to be made under Rule 26 of the Hong Kong Codes on Takeovers and Mergers.
Although revenue growth in the last couple of years, has been negative, earnings growth has been declining by, even more, implying that Pantronics Holdings has been ramping up its expenses. This harms margins and earnings and is not a sustainable practice. Viewing growth from a sector-level, the HK electronic industry has been growing, albeit, at a muted single-digit rate of 9.2% in the past twelve months, and a substantial 13.1% over the past five. This growth is a median of profitable companies of 24 Electronic companies in HK including Truly International Holdings, Prime Intelligence Solutions Group, and Ju Teng International Holdings. This shows that any uplift the industry is enjoying, Pantronics Holdings has not been able to reap as much as its industry peers.
When asked if the exchange intends to conduct a backdoor listing, Huobi CEO Li Lin said that “it is just a rumor.” Li declared that the exchange business is currently not fully compliant on a global scale, so a backdoor listing would be very difficult to operate. Li added that he believes the “traditional financial market will embrace the blockchain economy in the future.”