TAIPEI — Shares of Nanya Technology Corp., one of Taiwan’s dynamic random access memory (DRAM) chip makers, staged a rally in Friday morning trading after its major shareholders agreed to inject capital into the company through a fundraising plan, dealers said.
The buying showed investors’ optimism that Nanya, a memory chip manufacturing arm of financially healthy Formosa Plastics Group (FPG), will weather the impact caused by the down turn of the global DRAM business, dealers said.
As of 11:20 a.m., Nanya had risen 7 percent, the maximum daily increase, to NT$2.67 (US$0.09), with 8.59 million shares changing hands. The benchmark weighted index was down 1.49 percent at 7,277.92 points.
In an extraordinary general meeting Thursday, Nanya’s shareholders approved a proposal to allow the company to issue up to 15 billion new shares to raise funds through a private placement.
Four of FPG’s units — Formosa Plastics Corp., Nan Ya Plastics Corp., Formosa Chemical & Fiber Corp. and Formosa Petrochemical Corp. — have agreed to contribute NT$30 billion to acquire 10.83 billion shares under the fund raising plan.
The purchasing price will stand at NT$2.77, higher than Nanya’s share price, indicating the shareholders’ strong support for the company, dealers said.
“It seems that investors are relived to some extent because the fund injection will prevent the book value of Nanya from falling further,” Grand Cathay Securities Mars Hsu said. “Otherwise, the company could face a delisting from the bourse if its book value falls below zero.”
At the end of September, Nanya’s book value fell to NT$0.94 from NT$3.92 at the end of June after the company incurred massive losses due to weakening global demand.
In the first nine months of this year, Nanya incurred NT$28.88 billion in net loss, compared with NT$4.98 billion in net losses a year earlier.
“Luckily, Nanya has a rich father, FPG, that can lend financial support to the company amid the current unfavorable market circumstances,” he said.
However, Hsu said with DRAM prices further falling on a production glut, Nanya and its counterparts are unlikely to see a turnaround any time soon, since the business is expected to continue to suffer large losses.
“In my estimation, Nanya’s cash position is on the decline at a pace of NT$4 billion-NT$5 billion a quarter due to the massive losses. To stay afloat, the company would need a lot of funds,” Hsu said.
Hsu said Nanya’s decision to cut its production by 10-20 percent in the fourth quarter is the right thing to do to narrow losses.