Q&K International Group Limited (“Q&K” or the “Company”)
(NASDAQ: QK) announced today that one of its subsidiaries has
entered into agreements dated July 22, 2020 with a rental service
company and its affiliates (collectively, the “Transferor”)
pursuant to which it will acquire lease contracts with landlords
and tenants and related fixtures, equipment and other assets for
approximately 72,200 rental units in China from the Transferor (the
“Acquisition”). The total consideration is US$130 million, less
certain liabilities to be assumed by the Company pursuant to the
Acquisition, payable in installments in a combination of cash and
shares of the Company that are subject to lock-ups for certain
periods. The Acquisition is subject to customary closing conditions
and is expected to be completed by December 31, 2020.
The same subsidiary of the Company has engaged a
third-party contractor (the “Contractor”) to manage these rental
units in China, starting from July 2020 for eight years. The
Company will pay the Contractor a monthly management fee as a
percentage of the monthly rentals from the rental units under the
Contractor’s management, subject to adjustments based on certain
performance indicators set forth in the agreement.
This Acquisition is Q&K’s third acquisition
since the consummation of its IPO in November 2019. Prior to the
Acquisition, the Company acquired certain lease contracts with
landlords and tenants and related fixtures and equipment in Tianjin
from a rental service company in December 2019 and in Sichuan and
Chongqing from another rental service company in January 2020, for
a total of approximately 49,000 rental units (the “Prior
Acquisitions”). In the Prior Acquisitions and the Acquisition, the
Company has acquired lease contracts with landlords and tenants and
related fixtures and equipment for approximately 121,000 rental
units in China.
In conjunction with the Acquisition, the Company
has executed a convertible note and warrant purchase agreement
dated July 22, 2020 (the “Purchase Agreements”) with an investor
under which the investor may subscribe at par for up to US$100
million in aggregate principal amount of the Company’s four-year
convertible notes (the “Notes”) and five-year warrants to subscribe
to a certain number of ADSs. The investor is a non-U.S. person, and
the transaction is an offshore transaction exempt from registration
with the U.S. SEC under Regulation S of the United States
Securities Act of 1933, as amended (the “Securities Act”). Closing
of the first issuance of the Notes is expected to occur on July 29,
2020 and the transactions are subject to customary closing
conditions.
The Company’s management believes that the
Acquisition and the subscription of the Notes reflect the
Transferor’s and investors’ strong belief in the attractive
prospects of China’s long-term apartment rental market, as well as
the capability of Q&K as the leading branded co-rental platform
in China to further consolidate the market. With the additional
funding from the Notes, combined with continued support from
leading Chinese banks with whom the Company has built strong
strategic relationships, Q&K aims to accelerate its growth plan
by integrating more high quality rental assets from other operators
onto its technology-driven management system and to further enhance
its scale, overall operating efficiency and profitability.
Overview of the Notes and Warrants
The Notes will be convertible at the conversion
price, at the option of a holder, into the Company’s American
depositary shares (“ADSs”). The conversion price per ADS is
equivalent to 120% of the 30-trading day volume-weighted average
price (“VWAP”) of the ADSs as of the issuance date of the Notes or,
if certain ADS offerings are conducted, 80% of the issue price of
such ADS offerings, subject to adjustments upon the occurrence of
certain specified dilutive events. A holder may convert its Notes
at any time on and after the 41st day after the issue date and
prior to the maturity date. A holder may require the Company to
redeem its Note at the specified fundamental change repurchase
price, which includes a premium, upon the occurrence of a
fundamental change, including a change of control of the Company.
The Company may require the holder to mandatorily convert its Notes
upon the occurrence of a mandatory conversion event. The Notes have
two series. Series 1 bears interest of 7.5% per annum payable in
cash annually and another 7.5% per annum payable in cash on the
maturity date or, in the event of a conversion, on the conversion
date in ADSs calculated at the conversion price. Series 2 bears
interest of 3.5% per annum payable in cash annually and another
13.5% per annum payable in cash on the maturity date or, in the
event of a conversion, on the conversion date in ADSs calculated at
the conversion price.
Pursuant to the Purchase Agreement, the Company
will issue to the holder of the Notes warrants to subscribe to ADSs
on the issuance date of the Notes and on each anniversary date of
the Notes based on the principal amount of the Notes outstanding as
of such anniversary date. Each of the warrants expire five years
after its respective issue date and has an exercise price
equivalent to 110% of the VWAP of the ADSs over the 60 trading days
preceding the date of issuance of each warrant, subject to certain
adjustments upon the occurrence of certain dilutive events. Closing
of the transactions are subject to customary closing
conditions.
The Notes, the ADSs deliverable upon conversion
of the Notes or exercise of the Warrants and the ordinary shares
represented thereby, have not been registered under the Securities
Act or any state securities laws and are subject to restrictions on
transferability and resale. They may not be transferred or resold
absent registration or an applicable exemption from registration as
permitted under the Securities Act and other applicable securities
laws.
This press release shall not constitute an offer
to sell or a solicitation of an offer to purchase any securities,
nor shall there be a sale of the securities in any state or
jurisdiction in which such an offer, solicitation or sale would be
unlawful.
About Q&K International Group
Limited
Q&K International Group Limited (NASDAQ: QK)
is a leading technology-driven long-term apartment rental platform
in China. The Company offers young, emerging urban residents
conveniently-located, ready-to-move-in, and affordable branded
apartments as well as facilitates a variety of value-added
services. Q&K signs long-term leases with individual landlords
in different locations in relatively inexpensive yet convenient
locations and manages them centrally, leveraging its advanced IT
and mobile technologies. Technology is the core of Q&K’s
business and is applied to every step of its operational process
from apartment sourcing, renovation, and tenant acquisition, to
property management. The focus on technology enables Q&K to
operate a large, dispersed, and fast-growing portfolio of
apartments with high operational efficiency and deliver a superior
user experience.
Safe Harbor Statement
This press release contains forward-looking
statements. These statements constitute “forward-looking”
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, and as defined in the U.S. Private Securities
Litigation Reform Act of 1995. These forward-looking statements can
be identified by terminology such as “will,” “expects,”
“anticipates,” “future,” “intends,” “plans,” “believes,”
“estimates” and similar statements. Among other things, the
quotations from management in this press release and the Company
and its subsidiaries’ (collectively, the “Group”) operations and
business outlook contain forward-looking statements. Such
statements involve certain risks, uncertainties and other factors
that could cause actual results to differ materially from those in
the forward-looking statements. These risks and uncertainties
include, but are not limited to the following: the Group’s ability
to access financing on favorable terms in a timely manner and
maintain and expand its cooperation with financial institutions;
the Group’s ability to expand into new markets; the Group’s ability
to manage its growth; the Group’s ability to integrate strategic
investments, acquisitions and new business initiatives; the Group’s
ability to control the quality of its operations, including the
operation of the rental apartments managed by its own apartment
managers or by third-party contractors; the Group’s ability to
attract and retain tenants and landlords, including tenants and
landlords from its acquired lease contracts; the Group’s ability to
manage its brand and reputation; the Group’s goal and strategies;
the Group’s limited operating history; the Group’s ability to
achieve or maintain profitability or continue as a going concern in
the future; the Group’s ability to compete effectively; and
assumptions underlying or related to any of the foregoing. Further
information regarding these and other risks is included in the
Group’s filings with the U.S. Securities and Exchange Commission.
Except as required by law, the Group does not undertake any
obligation to update any forward-looking statements, whether as a
result of new information, future events or otherwise.
For investor and media inquiries, please
contact:
Q&KE-mail: ir@qk365.com
ChristensenIn ChinaMr. Andrew McLeodPhone:
+86-10-5900-1548E-mail: amcLeod@christensenir.com
In USMr. Tip FlemingPhone:
+1-480-614-3004Email: tfleming@ChristensenIR.com
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