Digital China Holdings Announces Major Transaction: Proposed Private Placement of DCITS

Key Highlights of the Announcement

• Digital China Holdings Limited (“the Company”) has announced a major transaction involving a possible deemed disposal through a proposed private placement by its major subsidiary, Digital China Information Service Group Company Ltd. (DCITS).
• The private placement aims to raise up to RMB 1 billion by issuing no more than 20% of DCITS’s total issued shares (up to 195,154,887 new shares) to no more than 35 specific investors.
• The transaction, if fully executed, will result in a reduction of the Group’s equity interest in DCITS by approximately 6.44%, bringing the Group’s holding down to about 32.18% while DCITS remains a subsidiary.
• The private placement is subject to multiple regulatory approvals and shareholder consent.
• Use of Proceeds: Investment in AI technologies, establishment of a business base in Eastern China, and working capital replenishment.
• Lock-up Period: All new shares issued in the placement will have a six-month lock-up.
• Financial Consolidation: DCITS will continue to be consolidated in the Group’s accounts, with no gain or loss expected from the deemed disposal.

Details of the Proposed Private Placement

• Target Investors: No more than 35 specific subscribers, including institutional investors such as fund management companies, securities firms, trust companies, finance and insurance companies, qualified foreign institutional investors, and other eligible legal or natural persons.
• Subscription Method: All shares will be paid for in cash by independent third parties.
• Pricing: The issue price will be set at no less than 80% of the average trading price of DCITS shares over the 20 trading days prior to the pricing date, with adjustments for ex-rights or ex-dividend events.
• Listing: Newly issued DCITS shares will be listed on the Shenzhen Stock Exchange.
• Expected Completion: The placement is currently targeted for completion in the fourth quarter of 2026.

Use of Proceeds

• AI Technology Investment: Approximately RMB 320.91 million to enhance DCITS’s AI capabilities, including Retrieval-Augmented Generation (RAG) technology, intelligent software engineering platforms, and digital workforce systems.
• Eastern China Business Base: Around RMB 387.97 million to establish a new business base in Eastern China, aimed at improving R&D and delivery synergies, resource utilization, and client service responsiveness.
• Working Capital: Up to RMB 291.12 million (no more than 30% of total proceeds) to support business expansion and optimize capital structure.

Impact on Shareholding Structure

Upon the successful placement of the maximum shares, the Group’s equity stake in DCITS will decrease from approximately 38.62% to 32.18%. Despite the dilution, DCITS will remain a subsidiary of the Group, and its financials will continue to be consolidated. Importantly, the Group does not expect to recognize any gain or loss from this deemed disposal, due to continued control over DCITS.

Reasons for and Expected Benefits of the Private Placement

• Capital Optimization: Replenishing working capital will optimize DCITS’s capital structure, reduce gearing, and enhance risk resilience and profitability as the company accelerates its “AI + Finance” strategy.
• AI Leadership: Increased investment in AI will consolidate DCITS’s leading position in fintech, lower operational costs, and improve R&D quality and reliability.
• Strategic Expansion: The new business base in East China will support rapid business growth, enhance operational efficiency, and improve response times for financial institution clients.
• Shareholder Value: The Company expects to benefit directly from DCITS’s business growth, potentially supporting higher share valuations for the Company.

Regulatory and Shareholder Approvals Required

• The placement is subject to approval by the DCITS Board and shareholders, the Company’s shareholders at a special general meeting (SGM), the Shenzhen Stock Exchange, and registration with the China Securities Regulatory Commission (CSRC).
• No conditions may be waived; if any are not met, the placement will not proceed.
• A circular with further details will be dispatched to shareholders on or before 19 May 2026. Voting at the SGM will occur by poll.
• Should any connected persons become target subscribers post-book building, this will trigger additional requirements under Hong Kong Listing Rules regarding connected transactions.

Financial Performance of DCITS

The significant turnaround in profitability from 2024 to 2025, with net profit attributable to shareholders moving from a loss of RMB 524 million to a profit of RMB 56.4 million, is noteworthy for investors.

Important Considerations and Potential Price Sensitivity

• The proposed private placement is a major transaction and constitutes a deemed disposal under Hong Kong Listing Rules. This could be price sensitive as it impacts the Group’s shareholding and future potential earnings.
• The use of proceeds for AI investment and business expansion could enhance DCITS’s competitive position, thereby potentially increasing shareholder value.
• Completion of the placement is not guaranteed — it is subject to various regulatory, corporate, and market conditions.
• Share dilution: Existing shareholders in DCITS will experience dilution of their percentage ownership.
• If any connected persons participate, additional disclosures and approvals will be necessary, possibly affecting the timeline and structure of the transaction.

About Digital China Holdings and DCITS

Digital China Holdings Limited (est. 2000, listed in Hong Kong since 2001) is focused on AI-driven process transformation and the development of an intelligent economy ecosystem.
DCITS (est. 1996, listed on the Shenzhen Stock Exchange, code: 000555) is a leading fintech provider, serving over 2,000 financial institutions with more than 300 products.

Disclaimer

This article is for informational purposes only and does not constitute investment advice or an offer to buy or sell any securities. The proposed private placement is subject to regulatory and shareholder approvals and may not occur. Investors are advised to exercise caution and seek professional advice when considering investments in the Company.

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