GDS Holdings Limited ADR (GDS)

GDS Holdings Limited ADR (GDS) stock fell by 26.52%, triggered by disappointing news revealed alongside its fourth-quarter report. Investors reacted strongly to the company's announcements, which dashed hopes for positive outcomes.

• Q4 Results Overview: GDS published its fourth-quarter earnings results, reporting a 6.3% year-over-year revenue increase to approximately 2.56 billion Chinese yuan, or about $360.1 million. Despite this growth, the company incurred a substantial net loss of roughly 3.16 billion yuan, equivalent to about $445.7 million. Comparatively, in the same quarter of the previous year, the net loss was 177.9 million yuan, or roughly $24.9 million based on the current exchange rate. On a more positive note, the company's non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 5.7% year over year to about 1.13 billion yuan, or roughly $159.5 million. However, the adjusted EBITDA margin decreased slightly from 44.6% to 44.3%.
• Investor Disappointment: Investor disappointment stemmed from the company's decision not to sell its international segment, contrary to earlier speculation. This decision was reinforced by the appointment of a new CEO for its international business and a fundraising move through equity sales. These actions signal a strategic shift towards retaining and strengthening its international operations rather than divesting them.
• Strategic Shift: The announcement of Jamie Koo, the current chief operating officer, stepping down from his role to become the CEO of DigitalLand, the holding company for GDS' businesses outside of China, further emphasizes the company's commitment to its international operations. Additionally, the plan to raise $587 million through equity sales to support its international businesses indicates a firm stance on retaining and growing these units, diminishing the likelihood of a sale to an outside party in the near future. Overall, GDS's fourth-quarter report and accompanying announcements have led to significant market reaction, with investors closely monitoring the company's strategic moves in the coming quarters.

Shares of GDS Holdings Limited ADR (GDS) dropped by 5.42% from $9.23 to $8.73 in the trading on Friday, December 8, 2023. The reason why is GDS down today is due to the announcement of GDS securing a significant syndicated green financing facility for its data center project. GDS secured MYR1.27 billion in green financing from UOB Malaysia, Bank of China (Malaysia) Berhad, OCBC Bank (Malaysia) Berhad, and Standard Chartered Bank (Malaysia) Berhad. This financing will be used to complete the Nusajaya Tech Park (NTP) Data Center Campus Plot 1 development in Johor, Malaysia, representing a substantial investment in Malaysia's data center industry.

GDS's stock fell 6.61% related to news that the company violated of §§10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the U.S. Securities and Exchange Commission. The Company made false and misleading statements to the market. GDS CEO and Chairman of the Board William Wei Huang engaged in pre-paid forward contract transactions since May 2020 that he failed to disclose to the market. The transactions but Huang's ownership of the Company's shares at risk of dropping below 5% of its outstanding shares. Huang's ownership dropping below 5% would result in a change of control of GDS. Based on these facts, the Company's public statements were false and materially misleading throughout the class period. When the market learned the truth about GDS, investors suffered damages.

https://www.accesswire.com/viewarticle.aspx?id=765588&lang=en

GDS falling because the 2023 outlook for GDS is negative, considering the company's guidance of slower top line expansion and EBITDA margin contraction. GDS' disappointing year-to-date share price performance (-51%) and depressed valuations imply that negatives are priced in.

https://seekingalpha.com/article/4604941-gds-holdings-negative-outlook-priced-in