China Recycling Energy Corporation (NASDAQ: CREG) is having an incredibly strong start to the trading session this morning, and for good reason. The company announced that it has entered into an agreement to acquire 20% equity interest of Xi’an Xinhuan Energy. Of course, the news excited investors, sending the stock on a run for the top. Today, we’ll talk about:
- The acquisition news;
- what we’re seeing from CREG stock as a result; and
- what we’ll be watching for ahead.
CREG Heads For The Top On Acquisition News
As mentioned above, China Recycling Energy is having an incredibly strong start to the trading session after announcing acquisition news. In a press release issued early this morning, the company said that Shanghai TCH Energy Technology, its wholly-owned subsidiary, entered into an Equity Purchase Agreement with Mr. Jihua Wang. Under the terms of the agreement, CREG will aquire 20% equity interest in Xi’an Xinhuan Energy.
In return for the interest in the company, CREG will make a cash payment of RMB 60 million. The company will also pay 2.6 million shares of the company’s common stock at a value of $1.90 per share. Finally, the company will pay 17,376,950 shares of preferred stock using a value of $1.90 per share. The total transaction comes to RMB 360 million or $46.72 million.
In a statement, Mr. Guohua Ku, Chairman and CEO at CREG, had the following to offer:
We are very pleased to announce the good news that the Company has officially signed the agreement to purchase a 20% interest in Xinhuan, which is a big step for our company to enter the energy storage market. China’s energy storage industry has entered the fast track of development. With years of research and development and accumulation of energy storage technology, and active and innovative applications in the energy storage business, Xinhuan has emerged as a new star in the energy storage field with its leading energy storage system of MW-level “reserving – storing – supplying.” With a front-end energy storage technology scheme of “distributed layout, modular design, unitized access and centralized regulation,” Xinhuan has become a pioneer in the application of large-capacity battery energy storage systems in China. Several power storage stations have been built in Shandong and Shaanxi provinces in China. Upon the completion of our acquisition of 20% equity interest in Xinhuan, we expect that Xinhuan could contribute about RMB 20 million as the investment income to the Company under equity method of accounting each year due to the Company’s 20% ownership and voting stock of Xinhuan. With the combination of our market resources and customer relationship advantages and the energy storage technology advantages of Xinhuan, we expect to quickly seize a leading position in the energy storage market in China, promote new profit growth, and finally achieve both revenue and profit growth.
What We’re Seeing From The Stock
One of the first lessons that we learn when we start to dig into the market is that the news leads to moves. In the case of CREG, the news was overwhelmingly positive. With an equity interest in Xinhuan, the company can improve its resources while taking advantage of an investment in a company that is likely to grow. So it comes as no surprise that excited investors are sending the stock screaming for the top. At the moment (9:31), CREG is trading at $1.34 per share after a gain of $0.16 per share or 13.45% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on CREG. In particular, we’re interested in following the story surrounding the company’s growth following the announcement of the acquisition. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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