After Resumption of Trading, Initial Rise Followed by Decline: What Are Dongyang Guanghua's Odds of Acquiring Chindata?

China Business Journal reporters Gu Mengxuan and Li Zhenghao, Guangzhou and Beijing reports

Dongyang Sunshine (600673.SH) has made further progress in acquiring leading IDC company Qinhuai Data. Recently, Dongyang Sunshine released the “Preliminary Plan for Issuance of Shares to Purchase Assets and Raise Supporting Funds and Related Party Transactions” (hereinafter referred to as the “Transaction Plan”), providing additional details about the acquisition. After the disclosure of the plan, Dongyang Sunshine’s stock resumed trading on March 9.

The China Business Journal noted that after the plan was announced, on March 9, Dongyang Sunshine’s stock price rose by 5.82%. The following day, March 10, the stock price declined by 2.73%.

In previous reports, reporters interviewed Dongyang Sunshine about the motivation for the acquisition, reasons for moving from a stake to controlling interest, and the expected synergies. Recently, relevant officials from Dongyang Sunshine responded to these questions one by one.

Stock Price Performance After Resumption

Regarding recent stock price movements, a relevant Dongyang Sunshine executive told reporters that short-term fluctuations in the secondary market are usually influenced by multiple factors, including market sentiment, sector rotation, and overall market trends. Currently, the company’s announcement of the acquisition plan is progressing steadily and orderly.

Wan Li, a researcher at Ji’an Research Institute, pointed out that the stock price increase on the first day after the acquisition plan’s release often reflects the market’s valuation of strategic growth potential. By acquiring control of Dongshu Yihao, Dongyang Sunshine will gain controlling interest in Qinhuai Data, which suggests the company may further expand from traditional manufacturing into the field of computing infrastructure operations. In the context of rising AI computing demand, such industry upgrade narratives tend to attract investor attention, providing short-term support for the stock price.

Regarding the decline on the second day, Wan Li believes it more likely reflects the market’s rational digestion of the transaction details. After major M&A disclosures, investors often reassess multiple factors, such as the dilutive impact of issuing shares, asset quality, integration challenges, and transaction structure. “Additionally, some short-term funds may take profits after positive news, exerting downward pressure on the stock price.”

Wan Li also noted that the decline on the second day does not necessarily mean the market is negative about the acquisition itself. It may more likely indicate two aspects: one, short-term profit-taking by funds; and two, a re-pricing of the acquisition details by investors. Historically, stock prices after large M&A announcements tend to go through a process of “information digestion and revaluation” rather than a one-way trend.

Zhang Siyuan, a special researcher at Shushan Bank, told reporters that this fluctuation—rise and fall—reflects the market’s complex emotions and rational re-evaluation process regarding this major asset acquisition.

From Dongyang Sunshine’s performance on the second day, the market may be concerned about several factors: first, changes in the company’s asset-liability structure after the transaction; second, potential dilution effects from issuing shares; third, risks associated with Qinhuai Data’s high customer concentration; and fourth, the heavy asset nature of the data center industry, which entails significant future capital expenditure pressures. “This decline is a normal adjustment after positive news realization and a natural market response to the transaction’s complexity and uncertainty,” Zhang Siyuan said.

Reasonableness of the Issue Price

The Transaction Plan shows that after this transaction, the listed company is expected to directly and indirectly hold 100% of Dongshu Yihao’s equity, thereby indirectly holding 100% of the target asset Qinhuai Data.

On January 16, 2026, Dongyang Sunshine completed its stake in Qinhuai Data. Now, from a stake to control, what considerations led Dongyang Sunshine to make this move?

A relevant Dongyang Sunshine official told reporters that both the previous stake acquisition and this transaction are based on independent commercial judgments considering the current market environment, and are separate from each other, aligning with business and transaction logic.

Regarding the impact of this acquisition on Dongyang Sunshine, the official said that the transaction helps the company quickly enter the high-growth data center sector, optimizing asset and resource allocation. Additionally, through industry synergy with Qinhuai Data, the company aims to achieve technological breakthroughs and market expansion in core areas such as liquid cooling technology, electronic components, and embodied intelligence, further strengthening its core competitiveness in the digital economy infrastructure industry chain and building a solid industry moat for long-term development.

“Future plans include promoting the company and the target asset to become a comprehensive digital infrastructure and computing power service provider with a ‘green energy—advanced manufacturing—computing operation—AI application’ four-in-one competitive barrier, accelerating the company’s transformation into a high-tech enterprise in AI,” the official added.

The Transaction Plan states that, according to the “Reorganization Management Measures,” the issuance price of shares must not be lower than 80% of the market reference price; the market reference price is one of the average trading prices over the 20, 60, or 120 trading days prior to the pricing date. The current issue price is 19.68 yuan per share, which is not less than 80% of the average trading price over the 120 trading days before the pricing date, complying with relevant regulations.

Regarding the issue price, Wan Li pointed out that, from a regulatory perspective, the method used to determine this price is consistent with current rules.

However, from the perspective of market practice, Wan Li said that such pricing arrangements may still trigger discussions among investors about transaction fairness. When the long-term average price is rising, the issue price tends to be relatively low. Since issuing shares to acquire assets dilutes equity, investors usually pay close attention to whether the transaction price reasonably matches the value of the target assets.

“Therefore, the market’s key concerns include,” Wan Li further explained, “first, whether the final valuation of the target assets truly reflects their value; second, whether the transaction counterparties are related parties and whether the related-party transactions have been fully disclosed and reviewed independently; third, whether the issue price reasonably aligns with the final asset valuation.”

“Overall, the issue price is defensible under legal rules, but its economic reasonableness still needs to be further evaluated based on subsequent disclosures of valuation results and transaction details,” Wan Li concluded.

Expert Warnings on Investor Risks

Reporters noted that the Transaction Plan includes risk warnings from Dongyang Sunshine, covering eight transaction-related risks, four risks related to the target assets, and two other risks. These include approval risks, integration risks, goodwill impairment risks, among others; risks related to the target assets mainly involve intensified market competition, policy changes, and high customer concentration.

Regarding the risks faced by this acquisition, Wan Li pointed out that the most critical are the corporate governance and transaction fairness risks under related-party transactions.

Wan Li explained that this is not a typical market-based acquisition. Dongshu Yihao is strongly related to Dongyang Sunshine’s controlling shareholder system, and the listed company is acquiring its equity through share issuance, ultimately controlling Qinhuai Data’s China operations.

“In such a structure, the market’s main concern is not whether the direction is correct, but whether the price is fair, procedures are transparent, and interests are balanced,” Wan Li said. “Regulators typically focus on key issues such as whether the transaction pricing is reasonable, whether asset valuation is sufficient, whether related-party disclosures are complete, and whether independent directors, financial advisors, and auditors have played their proper oversight roles.”

Second, Wan Li noted that under the framework of issuing shares to purchase assets, governance risks can further translate into issues protecting minority shareholders. If the transaction price, valuation, or subsequent operational performance deviates from expectations, public shareholders will face dilution and revaluation pressures. These risks are not just procedural but ultimately impact the company’s long-term value and minority shareholders’ interests.

“This acquisition has strategic appeal, but whether it can create long-term value depends less on hype and more on whether the transaction is fair, governance is sound, and integration is effective,” Wan Li summarized. “The governance and fairness risks under related-party transactions remain the most critical risks to watch.”

Zhang Siyuan also believes that among the various risks mentioned in the plan, goodwill impairment risk deserves particular attention.

The plan states that, due to factors such as policy environment, market demand, and post-acquisition integration, the future performance of the target assets may fall short of expectations, leading to goodwill impairment risks, which could adversely affect Dongyang Sunshine’s future operations.

This risk is significant because the transaction price is as high as 28 billion yuan, likely generating substantial goodwill. If Qinhuai Data’s future performance underperforms, goodwill impairment could significantly impact Dongyang Sunshine’s net profit.

Furthermore, the data center industry is cyclical, affected by macroeconomic conditions, technological changes, and policy adjustments, leading to high performance volatility. Although Qinhuai Data is currently performing well, its sustained high growth remains uncertain.

From a legal perspective, senior partner Sun Yuhao of Shanghai Huhua Yongtai Law Firm told reporters that, based on the “Company Law” principles of capital maintenance and the “Securities Law” requirements for disclosure of major asset restructuring, Dongyang Sunshine’s high leverage (65.52% as of Q3 2025), high share pledge ratio of controlling shareholders, and the potential for high goodwill from this transaction could pose risks. If future cash flows cannot cover the acquisition loans or trigger goodwill impairment, the company’s ongoing viability could be threatened, and stock price fluctuations might trigger pledge margin calls, risking control rights. This directly relates to whether the transaction aligns with the core requirement of enhancing sustainable operations in major asset restructuring.

Regarding potential risks, Dongyang Sunshine officials stated that the company will conduct thorough due diligence, ensure proper disclosure and compliance, and actively promote reporting and approval procedures according to regulations. The company will continue to disclose progress in a timely and accurate manner.

(Edited by Wu Qing; reviewed by Li Zhenghao; proofread by Yan Yuxia)