Shares of Futu (NASDAQ:FUTU) have fallen today, down by 7% as of 1:10 p.m. EDT, after the company announced pricing of a secondary offering. The offering to sell 9.5 million American depositary shares (ADSs) was proposed a couple of days ago.
The deal was priced at $33 per ADS, which was below yesterday's closing price of $35.40. It's not uncommon for companies to price secondary offerings at a discount to the market in order to entice investors into buying the stock. The underwriters of the offering will have an option to purchase up to 1.43 million more ADSs based on investor demand.
Existing shareholders will end up being somewhat diluted after the deal. Each ADS represents 8 ordinary Class A shares in the Chinese fintech company, so the 9.5 million ADSs represent 76 million Class A shares. After the offering, there are now 538 million Class A shares (549.5 million if underwriters exercise their options) and 544.5 million Class B shares outstanding.
Futu says it expects to receive between $301.8 million and $347.2 million in net proceeds from the offering, depending on whether underwriters exercise their options. The company plans to use that money for its margin financing business, as well as general corporate purposes.
The Chinese online broker has been growing its margin business, with margin financing and securities lending balance jumping 83% in the second quarter to 7.5 billion Hong Kong dollars. Futu had 9.3 million total users at the end of June.