21Vianet Group Inc – ADR (NASDAQ: VNET) stock rose 15.79% on October 15th, 2019 (Source: Google finance) after the company announced capital structure initiative and got selected by Alibaba Group as one of its IDC providers to help expand its footprint.
VNET has signed an agreement with Personal Group Limited, which is a British Virgin Islands company that is wholly owned by Mr. Sheng Chen, the Executive Chairman of the Board of Directors of the Company. As per the agreement, the company has agreed to issue up to 60,000 newly created Class C ordinary shares to the Personal Group at a price of US$1.35 per share, which is equal to the volume weighted average price of the Company’s American depositary shares (ADSs) for the 30 trading days up to and including October 11, 2019. This will be adjusted by the ADS-to-share ratio. Each ADS reflects six Class A common shares of the company. As per investor right agreement, two of the Company’s existing shareholders, King Venture Holdings Limited and Xiaomi Ventures Limited, have the participation right. According to which they can subscribe up to 5,049 and 1,468 Class C ordinary shares, respectively, on the same terms as the Personal Group. If these two shareholders exercise their participation right, the number of Class C ordinary shares issued to the Personal Group will be reduced accordingly. This issuance of the newly created Class C ordinary shares is an initiative by the company for the enhancement of its ability to execute business strategies over the long term under the leadership of the Company’s board and senior management. Class C ordinary shares entitle the holders thereof the same rights as Class A ordinary shares except for the voting right on three corporate matters and conversion right. The issuance has been approved by the Company’s audit committee and board of directors.
On the other hand, VNET has signed a memorandum of understanding (the MoU) with Alibaba to deploy IDC services. The project will be located in Eastern China and has to deployed in two phases. The first phase is projected to get complete construction and to be delivered by the first half of 2020. During the term of the project contract, the first phase is anticipated to generate revenue of RMB1.6 billion. VNET intends to strengthen its relationship with Alibaba for its expansion.