Shares of Z.AI fell more than 10% on Monday following the announcement of its latest capital raising plans, according to CNBC TV18. The Beijing-based artificial intelligence company unveiled plans to raise approximately $5 billion through a combination of Hong Kong share placement and convertible bond sales, marking its second large capital raise in two months. The market reaction highlights investor concerns about the scale of capital deployment required by Chinese AI companies to expand their computing and model-development capabilities.
The fundraising was launched on Friday, offering 21.97 million new Hong Kong shares at HK$714 ($91.05) each, representing a 10% discount to Friday's closing price of HK$793. The company is targeting gross proceeds of about HK$15.68 billion ($2 billion) from the share placement. Additionally, Z.AI will raise 20.14 billion yuan ($3 billion) through zero-coupon bonds due in September 2027, with the yuan-denominated bonds to be settled in US dollars. The latest fundraising comes as the company's 60-day lock-up period following its July placement expires, allowing the company to access additional capital markets.
The convertible bonds were issued at 100.5% of their face value and carry an initial conversion price of HK$892.50, representing a 12.5% premium to Friday's closing price. According to the company filing, Z.AI can redeem all but not part of the bonds from February 18, 2027, if its shares trade at or above 130% of the conversion price for 20 out of 30 trading days. The bonds are zero-coupon instruments, meaning they pay no interest during their life and are redeemed at face value upon maturity.
As reported in the company filing, approximately 60% of the net proceeds will be allocated for research and development of the company's next-generation models and its fully self-training system. An additional 15% of the proceeds will support the company's expansion plans, while the remaining funds will be used to optimize capital structure, replenish working capital for daily operations, and for other general corporate purposes. The latest funds will specifically advance Z.AI's next-generation AI models, including research and development, model training and inference infrastructure, as well as commercialisation efforts.
The latest fundraising follows Z.AI's $4 billion follow-on share sale in July, which raised HK$31.4 billion from the sale of 19.78 million shares at HK$1,588 each. The July placement came shortly after a six-month lock-up on 25.68 million initial public offering shares held by cornerstone investors expired. The company is also pursuing a listing on Shanghai's Star Market, having completed regulatory tutoring and secured shareholder approval for an offering targeting up to 15 billion yuan, though no application has been publicly accepted yet. Z.AI's repeated tapping of capital markets underscores the heavy costs of developing frontier AI models as Chinese AI developers seek capital for the costly computing infrastructure and talent needed to compete with larger US rivals. The fundraising also comes after Z.AI's shares had rallied last month following the launch of a new AI model that the company said was powered entirely by Chinese-made chips, claiming the model was supported by 100,000 domestically produced chips for handling online queries.
