This article only represents the author's own views.
Chow Tai Fook Jewellery Group Ltd. (1929.HK) is seeing glitter in a new convertible bond issue, its first equity fundraising since its 2011 IPO, as it seeks to seize on recovering global consumer sentiment and record-high gold prices. The Hong Kong jeweler’s fundraising, even as it already boasts strong cash reserves and a rising stock price, may look surprising at first. But the move may also shine some light on Chow Tai Fook's vision for its next growth phase.
According to its announcement last week, Chow Tai Fook issued HK$8.8 billion ($1.12 billion) worth of convertible bonds with an annual interest rate of 0.375%, maturing in 2030. When the bonds mature, investors will have the right to convert them to stock for an initial conversion price of HK$17.32, representing a 26% premium over the stock’s closing price of HK$13.72 the day before the announcement. The company will use proceeds to develop and finance its gold jewelry business, and for store upgrades and domestic and international expansion.