Eliza Wong
Jiuhua Mountain Tourism Scraps Major Fundraising Plan
On September 10, Jiuhua Mountain Tourism (stock code: 603199) announced the termination of its private placement plan and withdrawal of related application documents. The decision comes after the Shanghai Stock Exchange twice raised review opinions requiring the company’s response during the approval process. This sudden reversal highlights the increasing regulatory scrutiny facing Chinese listed companies and raises questions about how tourism firms are planning their post-pandemic recovery strategies.
Behind the Termination Decision
Jiuhua Mountain Tourism explained that the decision to terminate the private placement was “based on changes in the current market environment and the company’s development planning factors, made after comprehensive consideration as a prudent decision.” The company further emphasized that terminating the placement would not affect normal production and operations, nor would it harm the interests of the company and all shareholders, particularly minority shareholders. This carefully worded statement suggests the company is attempting to balance regulatory concerns with investor relations while maintaining flexibility for future financing options. The tourism industry has faced significant headwinds in recent years, and market conditions have shifted considerably since the placement was first proposed.
Regulatory Scrutiny and Exchange Inquiries
During the review process, the Shanghai Stock Exchange raised several critical questions about the placement proposal. Regulatory authorities focused specifically on: – The necessity of the fundraising projects and rationality of new capacity additions – Whether benefit predictions for the projects were prudent and reasonable – The rationality of the financing scale in light of the company’s monetary funds and financial asset balances These inquiries reflect regulators’ increased focus on ensuring that listed companies’ fundraising plans are justified, properly priced, and in the best interests of shareholders. The exchange’s scrutiny appears to have played a significant role in the company’s ultimate decision to withdraw the placement application.
The Original Fundraising Plan
According to the placement plan disclosed in May, Jiuhua Mountain Tourism originally planned to raise 500 million yuan (approximately $75 million) to invest in several projects: – Jiuhua Mountain Lion Peak Scenic Area passenger cable car project – Jiuhua Mountain Julong Hotel and Jiuhua Mountain Central Hotel North Building guest room upgrade projects – Transportation equipment enhancement projects The cable car project represented the centerpiece of the fundraising effort, with the company planning to invest 326 million yuan to cultivate new profit growth points. The company anticipated this cable car would generate average annual revenue of 111 million yuan and after-tax profit of 37 million yuan.
Ambitious Financial Projections
Jiuhua Mountain Tourism disclosed detailed projections for the cable car project. The Lion Peak Scenic Area passenger cable car would span approximately 2,150 meters with a total height difference of 632 meters. The company expected to charge 160 yuan per person for round-trip tickets, positioning it as moderately priced within the industry. Based on comparable companies’ cable car operation experience, the company projected: – First-year ridership of 224,000 passengers – Annual growth of 15% thereafter – Stabilization beginning in the 15th year – Gross margin reaching 71.69% in the 15th year of operation These projections appeared optimistic given current market conditions and the company’s existing financial position.
Financial Context and Cash Position
As of March 31, 2025, Jiuhua Mountain Tourism reported monetary funds and financial asset balances totaling 594 million yuan. This substantial cash position raised questions about why the company needed additional financing through a private placement. The company’s strong liquidity position likely contributed to regulatory skepticism about the necessity of the fundraising effort.
Justifying the Fundraising Need
In response to regulatory inquiries, Jiuhua Mountain Tourism revealed that beyond the placement projects, management planned additional investments totaling 923 million yuan. These included: – Jiuhua Mountain Scenic Area Lion Peak Scenic Area Yun波 Leisure Residence project – Jiuhua Mountain Baisui Palace Cable Car upgrade project – Three additional investment projects The company estimated a total funding gap of 698 million yuan over the next three years, exceeding the planned 500 million yuan placement amount. This justification attempted to address regulatory concerns about the scale of financing needed relative to the company’s existing resources.
Project Continuation Despite Placement Termination
Despite terminating the private placement, the Lion Peak Scenic Area passenger cable car project may still proceed. According to the Chizhou Natural Resources and Planning Bureau’s state-owned land use right transfer announcement, Jiuhua Mountain Tourism has already secured the cable car project land for 14.35 million yuan. The bureau stated that both parties had signed a transaction confirmation letter and would execute a transfer contract within 30 days. This suggests that while the financing method may change, the company remains committed to developing the cable car project. The company may explore alternative funding sources, including debt financing or internal cash flows, to advance its development plans.
Market Implications and Investor Considerations
The termination of Jiuhua Mountain Tourism’s private placement reflects broader trends in China’s regulatory environment and capital markets. Investors should consider several key factors: – Regulatory scrutiny of listed company fundraising is increasing significantly – Companies must demonstrate clear need and rational projections for capital raises – Alternative financing options may be pursued when placements face regulatory challenges – Project viability must be assessed separately from financing method The tourism sector continues to face uncertainty, and companies must balance growth ambitions with financial prudence.
Lessons for Listed Companies and Investors
The Jiuhua Mountain Tourism case offers important lessons for both listed companies and investors. Companies seeking to raise capital must: – Ensure fundraising proposals are thoroughly justified with conservative projections – Maintain transparent communication with regulators throughout the review process – Prepare alternative plans in case primary fundraising methods encounter obstacles Investors should carefully evaluate: – The necessity of fundraising relative to company’s financial position – Regulatory feedback and company responses during review processes – Management’s ability to execute plans with or without proposed financing The increasing regulatory scrutiny represents a positive development for market quality but requires companies to elevate their planning and communication standards.
Looking Ahead: What’s Next for Jiuhua Mountain Tourism
While the private placement termination represents a setback, Jiuhua Mountain Tourism appears determined to continue its development plans. The company’s strong cash position provides flexibility to pursue projects through alternative means. Investors should monitor: – Progress on the cable car project using other funding sources – Company announcements regarding revised investment plans – Financial performance and capacity utilization trends – Regulatory developments affecting tourism and listed companies The company’s ability to adapt its financing strategy while advancing its projects will be crucial for maintaining investor confidence and achieving long-term growth objectives. The termination decision, while disappointing in the short term, may ultimately lead to a more sustainable financing approach that balances growth with financial stability. As always, investors should maintain a diversified portfolio and conduct thorough due diligence before making investment decisions in the dynamic Chinese market. For the latest updates on regulatory developments affecting Chinese listed companies, investors can monitor announcements from the Shanghai Stock Exchange and China Securities Regulatory Commission.
