Bold Ally (Cayman) Limited: Enforcement of up to 76,273,626 Class A ordinary shares (equivalent to 12,712,271 American depositary shares) of VNET Group, Inc.

Rhea-AI Summary

VNET Group, Inc. faces a significant challenge following an Event of Default by its shareholder, GenTao Capital Limited, regarding a US$50,250,000 margin loan. The lender, Bold Ally (Cayman) Limited, may now sell 48,515,634 Class A shares and 27,757,992 Class B shares pledged as collateral. This situation could substantially reduce the voting power of Mr. Chen, the Chairman of VNET, as he is fully liable for the loan. There are no restrictions on the sale of these shares, which might occur through public or private transactions, raising concerns about potential impacts on the company's stock price.

Positive

• None.

Negative

• Default on a US$50,250,000 margin loan by GenTao Capital Limited raises liquidity concerns.
• Potential massive sale of 48,515,634 Class A shares could dilute existing shareholder value.
• The chairman's voting interest may significantly decline, impacting corporate governance.

Following an Event of Default under a Loan secured by Class A ordinary shares and Class B ordinary shares

NEW YORK--(BUSINESS WIRE)-- Following the occurrence of a default by GenTao Capital Limited (the “Borrower”), a shareholder of VNET Group, Inc. (the “Company”) (NASDAQ: VNET), under a US$50,250,000 margin loan facility (the “Facility”), Bold Ally (Cayman) Limited (the “Lender”) has exercised its rights with respect to the collateral securing the Borrower’s repayment obligations under the Facility. A total of 48,515,634 Class A ordinary shares (in the form of 8,085,939 American depositary shares) and 27,757,992 Class B ordinary shares of the Company have been pledged to secure the Facility.

The Borrower is wholly owned by Mr. Chen Sheng, also known as Josh Sheng Chen (“Mr. Chen”), the Chairman of the Company’s Board of Directors. The Facility is full recourse to Mr. Chen.

Under the Facility, the Lender has the right to convert the pledged Class B ordinary shares into Class A ordinary shares and/or deposit such Class A ordinary shares in exchange for American depositary shares. There are no applicable lock-up restrictions in respect of the Class A ordinary shares or the American depositary shares of the Company (collectively, the “Securities”). Assuming that all Securities pledged under the Facility were sold, Mr. Chen’s voting interest in the Company would significantly decrease.

The Lender expects to effect sales of the Securities in one or more public market and/or private transactions, depending on market conditions. No assurance can be given how many sales will occur and the Lender will not have a commitment to purchase any Securities. No prospectus or other offering document will be used in connection with any sale of the Securities and the Company will not be involved with, or otherwise participate in, any such sale; sales will be made by the Lender solely on the basis of public information.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230207005947/en/

Brunswick Group, BoldAlly@brunswickgroup.com

Source: Bold Ally (Cayman) Limited

FAQ

What happened with VNET Group and GenTao Capital Limited?

GenTao Capital Limited defaulted on a US$50,250,000 margin loan, leading to potential sales of pledged shares.

How many shares are affected by the loan default at VNET Group?

A total of 48,515,634 Class A shares and 27,757,992 Class B shares are pledged as collateral.

What are the implications of the loan default for VNET Group's stock?

The sale of pledged shares may dilute existing shareholder value and decrease the chairman's voting power.

Who is responsible for the loan default at VNET Group?

Mr. Chen, the chairman of VNET Group, is fully responsible for the loan as the borrower.

Will VNET Group participate in the sale of pledged shares?

VNET Group will not be involved in the sale of the pledged shares; all sales will be conducted by the lender.