The9 Limited (NASDAQ: NCTY) is running for the top in the market this morning, trading on gains of more than 33% early on. The company announced the sale of assets, driving important funding through the doors. Today, we’ll talk about 3 reasons that this transaction is an exciting one, but before we do, let’s take a look at the transaction itself.
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NCTY Announces The Sale Of Assets
In a press release issued early this morning, The9 Limited announced that it has entered into a definitive agreement with Kapler Pte. Ltd. Kapler is a multi-business company with solutions in business property, infrastructure and investment.
According to the new agreement, NCTY said that Kapler will purchase 100% equity interest in several of its subsidiaries. These include The9Interactive, The9 Computer Technology Consulting and the collectively owned Zhangjiang Micro-electronic Port Block #3.
In exchange for the assets, Kapler has agreed to pay RMB493 million. That works out to be about $69.19 million given the current exchange rate.
As is always the case in these types of deals, NCTY said that the transaction is subject to customary closing conditions and payment schedules. Importantly, the company intends on using the majority of this funding to repay certain senior secured convertible notes that were issued and sold in December of 2015.
Three Reasons That This Transaction Is Exciting
When a big transaction like this takes place, it tends to garner quite a bit of excitement among the investing community. With gains well over 30% this morning, it’s clear that the news from The9 Limited is generating quite a bit of this excitement. Here are 3 reasons that the transaction is indeed an exciting one:
Reason #1: The Strategy Behind The Transaction
In the world of investing, we often hear the term “strategic transaction.” Unfortunately, strategy isn’t the strong suit of many in leadership positions during these types of moves. In this particular case, the transaction was a very strategic one.
When we break it down, what we see is The9 Limited offloading assets that, while they are valuable, are not the core of its survival. Even after the sale of these valuable assets, the company will have the ability to press forward with remaining assets.
So, it’s clear that while the company looked for an immediate opportunity to improve their financial position without giving away the house for lack of a better way of saying it.
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