(Yicai) Dec. 1 -- New Hope Liuhe’s stock dived after the Chinese hog breeding giant announced plans to raise as much as CNY7.4 billion (USD1 billion) through a private placement of shares to upgrade its farms and buy the equity of two units it does not already own.

New Hope [SHE: 000876] closed 8.8 percent lower at CNY9.12 (USD1.29) a share in Shenzhen today, after earlier sinking by as much as 9.9 percent, close to the 10 percent daily trading limit. The stock is down 29 percent so far this year.

New Hope will issue up to 30 percent of its total share capital to as many as 35 investors, the Chengdu-based company said late yesterday. The price of the shares is yet to be determined, but it will be no lower than 80 percent of the average price during the 20 trading days before the pricing date, it noted.

A private placement, usually done to raise capital for specific corporate purposes, can depress a listed firm’s shares through equity dilution, as the ownership percentage and earnings per share of existing shareholders fall if they are not involved in the placement.

About CNY3.6 billion (USD504.2 million) of the funds New Hope raises will go to upgrade biosecurity prevention and control and digital projects at its farms, some CNY1.5 billion will go to buying the rest of Shandong New Hope Liuhe Group and Xuwen Xinhao Agriculture and Animal Husbandry, and the rest will be for repaying bank loans, the firm said.

New Hope owns 91 percent of Shandong New Hope and 82 percent of Xinhao Agriculture and Animal Husbandry. Owning them outright will give New Hope greater control and enhance its management and decision-making efficiency, the firm noted.

New Hope is under pressure from tumbling pork prices in China this year. Its net loss widened 43 percent to CNY3.9 billion in the nine months ended Sept. 30 from a year ago, while revenue rose 6.3 percent to CNY106.7 billion (USD14.9 billion), according to its latest financial report.

Editor: Martin Kadiev