On the evening of April 12th, Goertek Technology announced its intention to reduce the uncertainty that its subsidiary GDC's participation may bring to the company's development by transferring 51% equity of its wholly-owned subsidiary, Goertek 51, in Hong Kong.
Goertek Technology holds a 44% stake in GDC through its subsidiary in Hong Kong. With GDC's operating income declining in the fiscal years 2022 and 2023, and operating profit turning from profit to loss with increasing loss margins, GDC reported a net loss of RMB -14.34 million and -26.9031 million for the fiscal years 2022 and 2023, respectively. Considering the ongoing risk of operating losses at GDC, the company intends to transfer the controlling stake of Goertek 51 in Hong Kong and thus divest GDC assets to reduce the risk of adverse effects on the company's future operations by GDC.
According to publicly available information, Goertek Technology invested $18.1147 million in 2019 through its subsidiary in Hong Kong to acquire the partial equity of GDC. The pricing of this equity transfer is based on the audit report issued by Tianjian Accounting Firm (Special General Partnership) (Tianjian Audit [2024] No. 7-324) as of December 31, 2023. The book value of the long-term equity investment held by Goertek 51 in GDC was $19.6253 million. Calculated at a 51% equity ratio of Goertek 51 in Hong Kong, the pricing of this transaction is $10.0089 million. After the completion of the transaction, Goertek Technology will still hold 49% equity of Goertek 51 in Hong Kong.
Furthermore, as GDC has not yet paid dividends of $1.98 million for the fiscal year 2021, the price of this transaction does not include this dividend. According to the agreement, this dividend still belongs to Goertek Technology.
