Investors usually shun loss making companies but BOE Technology Group seems to be an exception to that rule.
The country's largest LCD panel maker, which has only managed to post an annual profit once in the past four years, has successfully completed a 12-billion-yuan share placement to select investors, the biggest equity fund-raising effort in 17 months.
Nine institutional investors, including Haitong Securities and Southwest Securities, and one individual, Ke Xiping, who is the chairman of Xiamen Hengxing Industrial Co, subscribed to the shares, according to a stock exchange filing from the Beijing-based company.
BOE said the capital raised would be used to expand its liquid-crystal-display (LCD) production capacity, mainly the on-going TFT-LCD production line project in Hefei in central China's Anhui Province, which is set to begin operations by 2010.
BOE Technology is likely to turn into the world's third largest LCD panel provider once the new assembly line becomes fully operational.
Though criticized by many of BOE's small shareholders, many analysts believe the deal is a sign that liquidity is abundant in the stock market.
Some market watchers are worried that some of the new bank lending, which totaled more than 5 trillion yuan in the first five months of this year, will go to the stock and real estate market instead of being channeled into the real economy.
The current financial crisis may encourage domestic electronics goods makers to reconsider their traditional way of importing expensive LCD displays from overseas providers such as AU Optronics, Chi Mei Optoelectronics, Samsung and Sharp, analysts said.
However, many experts are still cautious about BOE's new investment as supply of LCD panels far outpaced current demand. And, with more overseas LCD panel makers, mainly the Taiwan firms, moving their factories to the Chinese mainland, the LCD market in China is expected to get more crowded.
A company spokesman said BOE was likely to make a profit only in the third quarter.
Analysts said it was highly unlikely that the company would make a profit this year.