Shares of Secoo Holding (Nasdaq: SECO) surged 19% in early trading Monday on news of the buyout offer from its founder and chairman.
Richard Rixue Li has proposed to take Secoo private at $3.27 per American depositary share, according to a statement posted by the company today. The buyout offer represents a 36% premium from Secoo’s close of $2.41 per share on Friday.
Currently, Li and his affiliates own around 19% of the issued and outstanding shares as well as 82% of the aggregate voting power in the online provider of upscale products and services. Li plans on funding the potential acquisition with a combination of debt and equity capital.
“Equity financing is expected to be provided in the form of rollover equity in the Company and cash contributions from me and third party sponsors,” Li wrote in a letter to Secoo’s board of directors.
He added, “I expect definitive commitments for the required financing, subject to terms and conditions set forth therein, to be in place when the Company enters into the Definitive Agreements.”
As of early trading today, Secoo hit a high of $2.87 per share. That marks its highest trading level in about five weeks. Shares of Secoo have been on a slide since late November, as Sino-U.S. trade tensions have continued to worsen.
In December, President Donald Trump signed a law that could delist Chinese firms from trading on American exchanges if they refuse to abide by U.S. auditing standards. Chinese firms with U.S.-listings have seen heat from Washington since the nation’s beverage maker Luckin Coffee (OTC: LKNCY) allegedly fabricated more than $300 million in sales.
While Chinese firms will have three years to comply with the new rules, a number of companies have been weighing buyout proposals over the past year with many undergoing privatization.
Meanwhile, Secoo has been a disappointment for investors that have owned shares in the company from day one. Since pricing its IPO at $13 per share, the stock is now down 78% to date.
The board of Secoo has established a “special committee of independent directors Messrs” to evaluate the proposal.