Private placement plan boosts shares of Inotera


TAIPEI — Shares of Inotera Memories Inc., a Taiwan-based memory chip-maker, staged a rally in Wednesday morning trading after the company announced plans for a private placement to boost its working capital, dealers said.

According to the company, its major shareholders, U.S.-based Micron Technology Inc. and Taiwan-based Nanya Technology Corp. are expected to participate in the private placement, which will issue up to 1.5 billion shares.

Inotera and Nanya Technology are both dynamic random access memory (DRAM) chip manufacturing arms of conglomerate Formosa Plastics Group.

“The participation by the two major shareholders shows their support for Inotera,” Horizon Securities analyst Benson Huang said.

“The move has given the market hope that Inotera will be able to obtain funds to maintain operations at a time when demand for DRAMs remains weak,” Huang said.

As of 11:33 a.m. Inotera had risen 7 percent on the Taiwan stock exchange, the maximum allowed in a single session, to NT$4.38 (US$0.14) with 12.66 million shares changing hands, while the benchmark weighted index was up 0.05 percent at 6,900.05 points.

Previously, Inotera had planned a rights issue of 1.1 billion new shares to raise about NT$7.7 billion, but it later canceled the plan because of market volatility.

On Tuesday, Inotera’s board decided on a different strategy and turned to its major shareholders for funds through the private placement.

The company is also planning to issue convertible bonds to raise another NT$5 billion and has also decided to negotiate a short-term loan of US$1.33 billion (NT$40 billion) with Micron.

Inotera is expected to use the funds to upgrade its production technology in a bid to cut operating costs in a market where product prices remain on the decline, Huang said.

“While the support from its major shareholders in raising funds is encouraging to investors at the moment, movement in Inotera shares will depend on whether and when DRAM prices stabilize,” Huang said.

According to Dramexchange Technology, a Taipei-based market information advisory firm, the average contract price of DDR3 4-gigabit DRAMs fell about 6 percent and the average contract price of DDR 2-gigabit DRAM shed about 3 percent in the past two weeks.

“With so much market uncertainty, I expect Inotera shares will encounter stiff resistance as they move closer to NT$4.8,” he said.