VisionChina Media Inc (ADR) (VISN) Dives 7% on Stake Sale Update

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VisionChina Media Inc (ADR) (NASDAQ:VISN) is off to a lousy start Monday morning after Friday’s run-up from $5.30 to $8.08 was halted pending further news. Today, VISN stock opened 11% lower amid that “further news.” Namely, it announced new details concerning the sale of its subway mobile TV ad business.

VisionChina Media Inc. (NASDAQ: VISN)For those unfamiliar with VisionChina, its business is in advertising, focusing on China’s mass transportation systems through mobile digital television networks. Currently, VISN has more than 30,000 buses running free Wi-Fi hotspots under the brand name “VIFI” in China.

The deal sees the company selling off 49% of its stake in VisionChina New Culture Media Co, which is VISN’s subway mobile TV ad business, to Ledman Optoelectronic.

CEO Limin Li had this to say:

“The sale of our subway mobile TV advertising business is a critical and strategic step for VisionChina Media, and we remain open in the future to sell the remaining 51% of our equity position in New Culture. We believe the execution of the New Agreements with Ledman will provide significant flexibility to satisfy our working capital needs and allow us to focus our resources on the fast growing WiFi business, and to further strengthen our leading position in China’s urban mass transit WiFi market.”

Ledman agreed to pay VISN 382.2 million yuan, translating to roughly $57.46 million in U.S. dollars. Li anticipates the deal will close in “the near future,” where Ledman will pay an installment of 321.2 million yuan (about $48.3 million) to VisionChina. Under the terms, VISN is required to use the payment in full to buy Ledman shares in a block trade within five business days of the payment.

The remaining amount will be paid by Ledman within 10 business days (not including the block trade time allotment) after the close of the deal. Theses shares are subject to a lockup until May 31, 2019, which doesn’t allow VisionChina to sell more than three-fourths of its Ledman shares during the first full year after the lockup expires.

The deal also prevents VISN (and affiliates) from doing similar business to its now-sold New Culture subway mobile TV advertising business for up to eight years after the transaction closes. What’s more, VisionChina is on the hook for its New Culture business if it fails to meets its profit targets (in yuan) of 60 million, 80 million and 100 million, respectively, for 2016, 2017 and 2018. In such cases, VISN will have to pay the difference by returning its acquired Ledman shares, or pay in cash if the shares are not enough.

As of press time, VISN stock was off closer to 7%, with shares bouncing between support at $6.64 and resistance at $8.59. VisionChina temporarily broke above resistance Friday before shares were halted pending news of its revised pact with Ledman.

As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/08/visionchina-media-inc-adr-visn-stock-nasdaq/.

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