The stock in Color Star Technology Co., Ltd. (Nasdaq: HHT) nearly 15% to 43 cents per American depositary share by Monday intraday on the company’s announcement of a $1.43 million registered direct offering.
Under the deal, the Beijing-based education services provider said in a statement today that it has agreed to sell 2.6 million ordinary shares. In a concurrent private placement, Color Star will issue unregistered warrants and buy up to 2.6 million ordinary shares, which will mature 5.5 years from the date of issuance. The warrants will carry an exercise price of 55 cents per share.
The Beijing-based company plans on using the proceeds towards the expansion of its education services and other general corporate purposes. The sole placement agent on the deal is Maxim Group LLC.
Separately, Color Star announced today that it has entered an agreement to acquire a full stake in the performance equipment and music education provider Color China Entertainment Ltd.
The news comes as Color Star has failed to close above $1 per share since Mar. 17, marking the beginning stages of the outbreak of Covid-19 in the U.S. Investors continued to not be impressed with Color Star today, as the company received a warning from Nasdaq in March for not being in compliance with its minimum required bid price of $1 per share. If Color Star doesn’t receive an additional 180 days from the stock exchange, it has until Sept. 1 to satisfy the requirement before it could potentially face a delisting or suspension.
It’s also important to note that in the full year 2019, Color Star reported revenues of $43.65 million, down 5% year-over-year on a net loss that nearly doubled to $14.39 million.
Formally known as Huitao Technology Co., Ltd., Color Star provides early childhood education services to daycares and preschools in China. That includes AI and robotic technologies, intellectual campus administration software as a service system, and personalized education planning.
The direct offering and concurrent private placement are expected to close on or around May 13.