On November 16, BRETON, an electric construction machinery provider that went public just six months ago, announced the completion of a HKD 250 million placement financing at HKD 25.08 per share, representing a discount of approximately 14.98% from the previous closing price of HKD 29.50. The raised funds will primarily be allocated to three areas: investment and development of overseas photovoltaic and energy storage projects, repayment of interest-bearing loans, and the R&D, commercialization, and demonstration of a multi-modal large model-driven autonomous mining truck collaborative scheduling system. This move, coming only half a year after its Hong Kong listing, has sparked widespread market discussion about the company's operational status and development strategy.
BRETON debuted on the Hong Kong market on May 7, 2025, raising approximately HKD 230 million during its IPO. However, the company faced tepid interest from institutional investors, with the international placement portion only achieving 0.92 times subscription, forcing reliance on retail investors to fill the gap. Notably, BRETON voluntarily waived the over-allotment option during its IPO, signaling a cautious market outlook on its post-listing performance.
Contrary to expectations, BRETON's stock initially defied market skepticism. On its first trading day, shares surged 38%, continuing to climb until June 30, when its price reached HKD 36.5 per share, giving it a market cap of HKD 8.8 billion. Inclusion in the Stock Connect program on September 8 further boosted sentiment, with shares hitting an intraday high of HKD 55.55 on September 12, pushing its market cap to HKD 20.9 billion—a 2.6-fold increase from its IPO valuation. However, the rally proved short-lived, with shares entering a prolonged downtrend thereafter.
Behind the volatility lies underlying operational concerns. BRETON's H1 2025 revenue grew 22.2% year-on-year to RMB 327 million, but losses widened to RMB 174 million, a 12.9% YoY decline. Negative operating and investing cash flows of RMB 150 million and RMB 60 million, respectively, highlight persistent reliance on external financing to sustain operations.
Companies typically conduct follow-on offerings at peak valuations to maximize funding efficiency. BRETON's decision to raise capital during a downtrend—with this placement exceeding its IPO size—has been interpreted as a red flag for liquidity stress. As of H1 2025, its cash balance stood at RMB 327 million against RMB 246 million in short-term and RMB 270 million in long-term debt. High inventory (RMB 230 million, 144 days turnover) and receivables (RMB 552 million, 231 days turnover) further strain working capital.
Despite the 15% placement discount, BRETON's shares closed at HKD 24.86 on December 12—below the offering price—diminishing investor confidence. The placement targets institutions, but weak institutional demand during its IPO casts doubt on this round's success. Notably, no sell-side coverage has been initiated since listing, reflecting low institutional recognition.
Joint placement coordinators include institutional-focused Cathay Haitong and high-net-worth platform TradeGo Market, hinting at challenges in attracting traditional investors. Additional pressure looms in 2026, when lock-ups expire for cornerstone investors (February 6) and H-shareholders (May 6), collectively releasing 64.7% of shares (excluding controlling stakeholders). Potential mass sell-offs could trigger severe price volatility.
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