PINTEC Technology Holdings Ltd – ADR (NASDAQ: PT) is running for the top in the premarket hours this morning after announcing that it has entered into an acquisition agreement. Here’s what’s going on:
PINTEC Technology Climbs On Acquisition News
In the press release, PINTEC Technology said that it has entered into an agreement to acquire all of the equity interest in Shenzhen Jishengtai Technology, or JST. JST is a securities technology firm based in Shenzhen, China.
PINTEC Technology went on to explain that JST internally designs and fully implements an end-to-end Broker Supplied System for automatic order matching and execution of securities trading. In fact, its technology is the core backbone system of Riche Bright Securities, a Hong Kong securities brokerage firm that was recently acquired by PINTEC.
As part of the acquisition, PINTEC will issue non-voting ordinary shares to JST’s original shareholders as consideration for the sale of the equity interest. This includes a fixed base of 38,098,200 shares and an additional maximum of 45,098,200 shares that are subject to downward adjustment based on certain performance targets.
The company went on to explain that these shares will be issued in reliance upon an exemption or exclusion from the registration requirement under Section 5 of the Securities Act of 1933.
Moreover, the transaction is subject to the completion of the requisite corporate and other approvals and customary closing conditions.
PINTEC said that the combined digital platform and system of JST and RB positions RB as a boutique brokerage by leveraging JST’s advanced new generation one-stop online securities system of various securities including stock, stock options, debt instruments, and trusts for trading, clearing, settlement, and data information.
Moreover, the combination will provide trading system services and support for other small and medium sized brokerages. The company said that these services target corporate clients across numerous industry segments including institutional investors, and high net-worth individuals, who have demand for real-time precision trading of high volume and frequency, sensitivity to margin control and financial leverage, as well as stringent risk management.
In a statement, STeven Sim, CFO at PINTEC, had the following to offer:
These acquisition of JST and RB will accelerate PINTEC’s plan in transforming our business by broadening our wealth management services to include fully digitized securities brokerage, which is more critical than ever in today’s environment as we see increasing appetite from corporate clients and investors for full service online securities platform. Over the years, PINTEC has always been data and technology driven, with primary focus on serving corporate and financial partners, which coincides with the success factors at JCT/RB as they service corporate clients via their proprietary online securities trading execution.
This cloud-based technology platform is capable of highly automated and highly secure infrastructure that drives all of the end-to-end electronic broker-dealer trading related function, which is a key attraction for us. We are confident that the combined strengths of our innovative digital platform of complementary services, continuity of B2B2C business model, and talented technical teams, will expand our wealth management offerings, deepen client relations, generate additional data and traffic, enhance our overall earnings power while further diversify revenue sources. From a financial perspective, we expect the acquisition of JST and RB to be neutral to accretive to PINTEC’s non-GAAP earnings per share in the first full fiscal year after the transaction closes.
The Bottom Line
The bottom line here is simple. The securities market in China represents a massive opportunity. At the end of the day, there are few competitors on the market, giving PINTEC a wide open field to play on. Moreover, as the market emerges in the country, the company is consolidating a fragmented market, building upon its ability to quickly become a leader in the space.
All told, PT stock is one to watch closely.