The share price of MiniMax Group Inc. experienced a significant drop following a second price target reduction by JPMorgan Chase & Co. in under a week, driven by worries over value dilution from a new capital raising initiative.
On Monday, MiniMax shares fell by as much as 14.67%, marking a potential third consecutive day of losses. The stock has now declined over 80% from its peak in March.
This latest decline was triggered by JPMorgan lowering its target price for MiniMax by an additional 20%, coming just days after a 25% cut the previous Tuesday. Analysts at the bank, including Olivia Xu, stated in a Sunday note that the AI company's recently revealed plan to raise up to $2 billion through new share issuance and convertible bonds would cause "meaningful dilution" for existing shareholders.
Selling pressure on MiniMax stock has also intensified since the end of last week, when a large block of shares held by major pre-IPO investors became free from a standard six-month lock-up period.
JPMorgan's analysts noted that while the proposed $2 billion fundraising would alleviate constraints on training resources, the trade-off is not balanced in terms of timing or certainty. They emphasized that the potential near-term financial advantages must be carefully considered against the immediate impact of share dilution and the limited effect on near-term revenue growth.
The company's plan involves raising approximately HK$9.5 billion ($1.2 billion) from a new share placement and an additional HK$6.5 billion through zero-coupon convertible bonds. JPMorgan estimates that if the bonds are fully converted, the combined transactions would increase the total share count by roughly 17%.
