China Rapid Finance XRF Stock News

China Rapid Finance Ltd (NYSE: XRF) is flying in the market this morning, trading on gains of more than 200% early on. The stock seems to be in the midst of a short squeeze, triggered by the announcement of a set of agreements. Here’s what’s going on:

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XRF Stock Runs For The Top On New Agreements

In the press release issued early this morning, China Rapid Finance said that it has entered into a set of agreements that will provide diversification for its shareholders. The agreements were signed with Yong Bao Two, the parent company of SOS Information Technology through a Variable Interest Entity, the shareholders of YBT.

These shareholders include eight sophisticated investors that XRF said were introduced by YBT and True North Financial.

Through the agreements, the investors have the ability to acquire share amounts previously issued to True North. The company also said that certain additional shares may be acquired in exchange for repayment of the Senior Secured Promissory Note issued by True North.

As part of the transaction, the YBT business will be absorbed by XRF and the investors will make certain cash investments. The transaction was priced at $1.36 per share, which represents a 25% premium to the 30-day average closing price at signing.

Moreover, there will be a series of management changes across the combined company.

Transaction Details

XRF said that True North will transfer 37,985,293 Class A shares of the company and will issue 3,465,574 Class B ordinary shares to the investors. To compensate for the price difference between the True North financing and current market price, about 8,066,241 Class A and 9,806,331 Class B ordinary shares will also be issued to the investors.

Through the transaction, China Rapid Finance said that all Class B shares previously issued to True North will be cancelled. As is always the case in these types of agreements, closing of the transaction is subject to closing conditions.

The Big Value For XRF Investors

This is a big opportunity because upon the close of the transaction, YBT is going to become a wholly owned subsidiary of China Rapid Finance. This offers China Rapid Finance a great diversification opportunity.

Through a series of subsidiaries, YBT is a key player in the emergency rescue business. The company provides emergency healthcare services, emergency roadside assistance, emergency living assistance, and other revenue services across China.

Importantly, this business is already seasonned and generating significant revenue, making this a big opportunity for XRF and its investors.

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