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Recently, Hong Kong-listed company GCL TECH (HK: 03800) announced a plan to acquire approximately 81.91% equity in Sichuan GCL Lithium Battery Technology Co., Ltd. ("GCL Lithium Battery") held by its controlling shareholder GCL Group. The preliminary estimated consideration is approximately RMB 2.5 billion, of which RMB 650 million will be paid in cash and RMB 1.85 billion through the issuance of shares.
GCL Lithium Battery's main business is the research, development, production, and sales of new energy lithium battery cathode materials, with its primary product being lithium iron phosphate cathode materials. Through this transaction, GCL Group will inject its lithium battery assets into GCL TECH, whose main business will expand from photovoltaic granular silicon into lithium battery materials.
It is worth noting that GCL TECH currently has RMB 9.7 billion in book monetary funds, alongside RMB 11.7 billion in short-term borrowings and RMB 6.1 billion in long-term borrowings over the same period. Previously, GCL TECH has conducted multiple financings on the Hong Kong stock market, with four additional share placements in the past five years alone, raising a total of over HKD 16 billion (approximately RMB 13.6 billion), yet its funding situation remains stretched.
In recent years, GCL TECH's core photovoltaic business has experienced cyclical performance fluctuations, but its cash flow has consistently been under pressure. Particularly in recent years, operating and investing cash flows have continued to show net outflows, relying entirely on external financing. Additionally, GCL Group has already pledged and reduced a large proportion of its equity in its A-share listed subsidiaries. With GCL TECH facing a massive funding gap and unable to make ends meet for consecutive years, the risks behind spending heavily to acquire the controlling shareholder's lithium battery assets at this juncture deserve market attention.
RMB 9.7 Billion in Cash Against RMB 17.8 Billion in Interest-Bearing Debt; Four Placements Raising RMB 13.6 Billion in Five Years
On October 19, GCL TECH announced a plan to acquire 81.91% equity in GCL Lithium Battery through a combination of cash and share issuance, with a transaction consideration of approximately RMB 2.5 billion. GCL TECH's main business is the research, development, production, and sales of granular silicon via the silane fluidized bed method, while also operating polysilicon, silicon wafers, industrial silicon, and photovoltaic power stations. GCL Lithium Battery's primary product is lithium iron phosphate cathode materials for new energy lithium batteries. Both companies share GCL Group as their controlling shareholder, with the actual controller being the Zhu Gongshan family. This transaction is essentially an internal asset shuffle within the "GCL system."
The announcement shows that the issuance price of new shares will be no lower than the net asset value per share as of June 30, 2026, meaning controlling shareholder GCL Group will subscribe to new shares at a price of no less than HKD 1.3 per share. On the last trading day before the announcement, GCL TECH closed at HKD 0.62 per share, implying a premium of nearly double the acquisition price per share.
However, as of the end of June 2026, GCL TECH had monetary funds of RMB 9.724 billion, short-term borrowings of RMB 11.720 billion, and long-term borrowings of RMB 6.092 billion, with total interest-bearing debt of approximately RMB 17.812 billion. Calculating solely the gap between cash and short-term debt, the shortfall already exceeds RMB 2 billion; including both short-term and long-term debt, the funding gap is approximately RMB 8.088 billion.
It should be noted that GCL TECH has previously conducted multiple financings at the Hong Kong stock level. In January 2021, GCL TECH completed a placement with net proceeds of approximately HKD 4.2 billion, and in December of the same year, another placement raised net proceeds of approximately HKD 5 billion. In December 2024, the company raised approximately HKD 1.56 billion through a placement. In 2025, the company conducted another placement raising HKD 5.45 billion. In just the past five years, GCL TECH has completed four additional share placements, raising a total of over HKD 16 billion, approximately RMB 13.6 billion, yet the company's funding situation remains tight.
Cyclical Performance Fluctuations, Cash Flow Entirely Dependent on Financing; Controlling Shareholder Pledges and Reduces Holdings Substantially
In recent years, GCL TECH's core photovoltaic business has shown cyclical fluctuations, with profitable and loss-making years alternating. However, the company's cash flow has consistently been under pressure. Taking the past five years as an example, for most of the period, GCL TECH's operating cash flow and investing cash flow have been in a net outflow state, while financing cash flow has been positive every year. In other words, GCL TECH's daily operations and capital expenditures have long relied on external financing to roll over and continue.
It is worth noting that GCL Group itself is also quite financially strained. The latest data shows that, as of now, GCL Integration's first and second largest shareholders — Jiangsu GCL Construction Management Co., Ltd. and GCL Group — have pledged all of their shares, while the third largest shareholder Shanghai Qiyin Enterprise Management Co., Ltd. has pledged 87.5% of its shares; GCL Energy Technology's second and fourth largest shareholders — Shanghai Qichen Enterprise Management Co., Ltd. and Shanghai GCL Chuangzhan Enterprise Management Co., Ltd. — have pledged all of their shares. All of the above entities are "GCL system" companies.
In fact, the main business of the acquisition target GCL Lithium Battery is no longer a blue ocean. According to relevant institutional forecasts, global new photovoltaic installations are expected to reach 584 GW in 2026, a year-on-year decrease of 10.8%, while new photovoltaic installations are expected to recover to 618 GW in 2027. Calculations by SolarPower Europe estimate that policy changes in China's photovoltaic sector in 2026 are expected to cause installations to decline by 24%, while global installations over the same period are expected to drop by 8% to 612 GW. A research report by CITIC Securities also shows that domestic effective lithium iron phosphate capacity in 2026 is approximately 7.29 million tons, with neutral demand expectations of only about 5.9 million tons, resulting in an industry average capacity utilization rate of approximately 81% for the full year. Against the backdrop of overall overcapacity, price wars could recur at any time.
GCL TECH stated that the target company has already supplied to CATL in bulk and has locked in a supply agreement for an estimated 1 million tons through the end of 2028, in addition to guaranteed minimum or intent orders from customers such as Envision AESC and HiTHIUM. However, the ultimate revenue recognition and profitability remain highly uncertain due to the lengthy cycle.
With GCL TECH itself facing a massive funding gap and still struggling in a cash flow predicament, directing scarce cash toward controlling shareholder GCL Group — which is also financially strained — raises the question of whether this is strategic foresight or a disguised transfer of funds, and it deserves close attention.
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