Graphex Group announces proposed corporate actions

Graphex Group Ltd (NYSE American: GRFX | HKSE: 6128), a company specializing in electrical industrial apparatus manufacturing, has announced a series of proposed corporate actions in a recent filing with the Securities and Exchange Commission (SEC). According to InvestingPro data, the company's financial health metrics show some concerns, with a negative return on assets of -94.13% and an Altman Z-Score of -10.81, indicating potential financial distress.

The actions include a share consolidation, a change in board lot size on the Hong Kong Stock Exchange (HKSE), an increase in authorized share capital, and a rights issue.

The share consolidation is proposed to be at a ratio that will result in three rights shares for every one consolidated share held on the record date, on a non-underwritten basis. This move is aimed at improving the trading liquidity of the company's shares. The company maintains a relatively low debt profile, with a debt-to-equity ratio of just 0.02, according to recent financial data from InvestingPro.

Simultaneously, Graphex Group intends to change the board lot size for trading on the HKSE, which is expected to make the shares more accessible to investors by reducing the minimum number of shares that can be traded.

Furthermore, the company is proposing an increase in its authorized share capital. This is a strategic step that could potentially provide Graphex Group with more flexibility for future financing and corporate opportunities. The company currently trades at a Price-to-Book ratio of 5.64, suggesting investors are paying a premium for its assets. For deeper insights into Graphex Group's valuation and over 30 additional financial metrics, consider subscribing to InvestingPro.

The rights issue, which is part of the proposed actions, will not be registered under the U.S. Securities Act and will not be offered or sold in the United States or to U.S. persons. As such, American Depositary Shares (ADS) holders will not be offered the rights issue. However, the company plans to allow the depositary to sell the nil-paid rights and distribute the net proceeds to the ADS holders, should it be lawful and practical to do so.

The details of these proposals were outlined in a circular dated Monday, January 27, 2025, which included letters from the Board of Directors, the independent Board Committee, and the Independent (LON:IOG) Financial Adviser to the company. An extraordinary general meeting is to be convened to consider and, if thought fit, approve the proposed transactions.

The company has clarified that the information provided in the circular is not complete and is subject to the terms and provisions set forth in the document. Graphex Group has emphasized that the information in the report is for informational purposes only and is neither an offer to sell nor a solicitation of an offer to purchase any securities.

These forward-looking statements involve risks and uncertainties, and there can be no assurance that the objectives will be achieved. The company's future results and strategies are dependent on various factors, including market conditions and regulatory approvals.

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