ZTE is aiming to raise 11.51 billion yuan ($1.7 billion) from a private placement of A shares.
China based ZTE plans to use the proceeds for research and development (R&D) of 5G networks as well as working capital.
ZTE has won 35 commercial 5G contracts in major markets, such as Europe, Asia Pacific, Middle East and Africa (MEA). ZTE says it commits 10 percent of its annual revenues to research and development.
The telecom equipment maker is set to issue 381.098 million A shares, or 8.27 percent of the total issued share capital on completion of the deal, to independent third party investors at 30.21 yuan per share.
That represents a discount of 18.2 percent to ZTE’s A-share closing price of 36.92 yuan in Shenzhen on Wednesday.
The A shares, which are subject to a lock-up period of 12 months from the date of listing, will be issued to 10 independent professional or institutional investors in China, Reuters reported.
None of the subscribers will become a substantial shareholder upon completion of the share sale, the company said, without providing further details.
“We believe the successful fund raising will remove a key overhang for the stock, and would give investors more confidence in ZTE’s R&D efforts and thus potential share gain in 5G,” brokerage Jefferies said in a research note.
“Our fundamental view remains negative, but near-term stock price could have support,” Jefferies said, adding it worried about margin pressure and market share pressure on 5G.
ZTE said the deal will enable it to maintain its high level of investment in R&D, ensure its technological competitive edge, develop its main products and businesses, as well as help increase its market share in the mainstream markets.
