Brokerage Futu Raises 1.24B to Cash in on Margin Lending

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HONG KONG Reuters Hong Kongbased online brokerage Futu Holdings Ltd has raised 1.24 billion by selling new shares at 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 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 ADRs 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 SFC showed there were 1.5 million active margin investors in Hong Kong at the end of 2020, up 144 from a year earlier.

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

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

The capital raising was Futus third in less than two years and Citi analysts estimated the deal would be 3.3 dilutive for Futus earnings per…

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