Color Star Tumbles 12% on $4.2 Million Direct Offering

The education provider agreed to sell around 3.2 million shares.

Author: Anthony Russo   

Shares of Color Star Technology Co., Ltd. (Nasdaq: HHT) plummeted 12% by midday Monday after announcing the pricing of its $4.2 million direct offering.

The education provider has agreed to sell around 3.2 million ordinary shares to "certain accredited investors"  according to its statement today. Color Star will issue unregistered warrants to buy up to around 2.1 million shares in a concurrent private placement. The warrants, which will expire in five and one-half years from the date of issuance, will carry an exercise price of $1.50 per share. The purchase price for one share and a corresponding warrant will be $1.50. The warrants will be exercisable "immediately" upon the issue date. 

Maxim Group LLC is the lone placement agent on the deal.

The move today follows the company's $1.43 million registered direct offering it announced in May, which also sent its stock tumbling. In mid-March, Color Star received a warning from Nasdaq that it was not in compliance with the stock exchange's minimum required $1 per share bid price. In the past week, however, it has seen its stock rise and looks like it should close above $1 per share for the sixth consecutive trading day. By midday, stock in Color Star was trading at $1.53 per American depositary share. Shares of Color Star are now up nearly 6% year-to-date. 

Through one of its wholly-owned subsidiaries Sunway Kids International Education Group Ltd., Color Star, formally Huitao Technology Co, provides early childhood education services to daycares and preschools in China. This includes AI and robotic technologies, intellectual campus administration software as a service system, and personalized education planning. 

In the full year 2019, Color Star reported revenue of $43.65 million, down 5% year-over-year on a net loss that nearly doubled to $14.39 million.

The direct offering and the private placement are both expected to close "on or around" Wednesday.