Shares of Chinese car e-commerce company Uxin (NASDAQ:UXIN) popped almost 9% as of 3:06 p.m. EDT Tuesday after the company announced some fresh financing a major shakeup with its board of directors. The financing will bring in $100 million now and more later, which is welcome news. And the new directors perhaps bring some added credibility to the company.
Uxin is issuing convertible notes that could bring in a total of $315 million for the company. For perspective, at the end of 2020, the company only had $44 million in cash and equivalents on the balance sheet despite registering a $25 million quarterly loss from operations — a somewhat bleak situation even considering its business fundamentals were relatively improved. In short, Uxin needed some cash and it got it. Today’s announcement wasn’t for the entire $315 million, but rather for the first tranche of convertible notes worth $100 million.
With today’s announcement, Uxin also announced that around 22.3 million American depositary shares (ADS) — the ones that trade here in the U.S. — from previous convertible notes had been converted by those entities. However, the holders of the newly issued convertible notes have agreed not to convert for at least nine months. Basically, when a company creates new shares, it’s bad for current shareholders because it dilutes their value. But at least in this case Uxin gets the benefits of the cash now without the downside of the conversion for the time being.
In addition to the financing, Uxin added four new members to its board of directors — members with experience in the investing world and automotive industry. Included is William Bin Li, the founder of Chinese electric-vehicle company NIO. NIO has been a massive market-beating investment and it’s possible that additions like Li to the board are bolstering investor confidence that Uxin can turn things around in the years ahead.
Management is indeed a big part of what can make or break an investment in the long term. So today’s news definitely warrants watching in coming quarters.
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