What happened
Shares of Baozun (BZUN 4.31%) were moving higher today after the Chinese e-commerce services provider announced it was repurchasing a convertible note. Additionally, it benefited from a broader tailwind among Chinese stocks as the government said it was taking a more conciliatory stance.
As of 12:55 p.m. ET, the stock was up 17.7%.
Image source: Baozun.
So what
This morning, Baozun said it had repurchased $166.3 million of 1.625% convertible senior notes due in 2024. $108.7 million now remains outstanding from the note it issued in 2019.
It's unclear why Baozun decided to spend money repurchasing the debt. The 1.625% interest is modest, especially in today's rising interest rate environment, and the notes were convertible at $52 per ADS, meaning the owner likely wouldn't have chosen to convert them since Baozun stock is trading just around $8 currently.
The note repurchase could pave the way to stock repurchases, which would give Baozun a boost as the stock has plunged over the last year in response to Beijing's crackdown. The more salient reason for the stock's gains today seems to be that the Chinese government is again saying it will take steps to prop up financial markets.
In a meeting of the State Council yesterday, officials vowed to support the economy, and avoid policies that would hurt investor sentiment in financial markets. For much of the last year, regulators have done the opposite, slapping fines on a wide range of tech companies as part of China's "common prosperity" push, and that shift sent Chinese stocks soaring last week.
Now what
Though Baozun stock has rebounded over the last week, it's still down 81% over the last year. In addition to the regulatory crackdown, Baozun's performance has also disappointed as revenue declined in its most recent quarter, and profitability fell sharply as well. While improving market sentiment toward China will help the stock recover, the underlying business also has work to do if Baozun is to recoup its prior losses.
