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Why Shares of 21Vianet Group Surged Today

By Timothy Green - Oct 14, 2019 at 12:18PM

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The Chinese data center services company made two announcements.

What happened

Shares of 21Vianet Group (VNET -1.49%) jumped on Monday on two pieces of news. The Chinese data center services provider announced a new project with Alibaba, and it announced an agreement to issue new shares to a company wholly owned by executive chairman Sheng Chen. The stock was up 16.1% at 11:45 a.m. EDT.

So what

21Vianet has signed a memorandum of understanding with Alibaba to deploy internet data center services in a project in eastern China. The project will be split into two phases, with the first expected to be completed by the first half of 2020. 21Vianet expects to generate revenue of RMB1.6 billion, or about $226 million at current exchange rates, from the first phase of the project.

A rising stock chart.

Image source: Getty Images.

On top of the Alibaba news, 21Vianet announced a deal to issue up to 60,000 newly created class C ordinary shares to Personal Group Limited, a company wholly owned by Chen. Existing shareholders King Venture Holdings Limited and Xiaomi Ventures Limited have the right to subscribe to 5,049 and 1,468 class C shares, respectively, as part of the deal. If that right is exercised, it would reduce the number of shares issued to Personal Group Limited.

Now what

"This issuance of the newly created Class C ordinary shares is an initiative by the Company to enhance its ability to execute business strategies over the long term under the leadership of the Company's board and senior management," reads the press release announcing the agreement. Class C shares carry the same rights as class A shares, except for certain veto and conversion rights.

While shares of 21Vianet still trade well below their 52-week high, Monday's rally has helped the stock make up some lost ground.

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