China AI developer Z.AI launches $5 billion Hong Kong share, convertible bond sales, term sheet shows
The fundraising comes as Chinese AI developers seek capital for the costly computing infrastructure and talent needed to compete with larger US rivals.
Beijing-based AI firm Z.AI has launched a combined Hong Kong share offering of roughly $2 billion and a $3 billion convertible bond sale, as reported by term sheets obtained by Reuters on Friday. This capital-raising effort comes amid intense competition in the Chinese AI sector, with companies vying for funding to invest in expensive computing infrastructure and talent to rival larger US-based counterparts.
Z.AI, formerly known as Zhipu AI, made its Hong Kong stock market debut in January and widened its shareholder base with a $4 billion share sale in July. Competitors such as MiniMax, Moonshot, and DeepSeek have also floated shares in Hong Kong, while Moonshot and DeepSeek are exploring potential listings in both Hong Kong and Shanghai, according to Reuters.
In the share placement, Z.AI is issuing 21.97 million new Hong Kong shares at HK$714 ($91.05) per share, which represents a 10% discount to Friday's closing price of HK$793. The company is simultaneously selling 20.14 billion yuan ($3 billion) worth of zero-coupon bonds set to mature in September 2027. These bonds will be settled in US dollars and will have a yield ranging from -0.5% to zero.
The bonds will be issued at face value, ranging between 100% and 100.5%, providing an initial conversion price of HK$892.50, which is a 25% premium to the HK$714 share placement price. Z.AI can redeem all or part of the bonds as early as February 18, 2027, if its shares trade at or above 130% of the conversion price for 20 out of the following 30 trading days.
The proceeds from both the share and bond sales will be allocated to research and development, computing resources, and related infrastructure, as well as expansion, strategic investments, potential acquisitions, working capital, and other general business purposes, according to the term sheet. The share placement and bond sale are occurring concurrently but are not contingent on each other's successful completion.
Global coordinator CICC is serving as the joint bookrunner alongside Guotai Junan Securities (Hong Kong) for this fundraising endeavor. However, Z.AI did not immediately provide a comment in response to a request for information outside of regular business hours.
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