Gou pledges Hon Hai shares as collateral for NT$24 billion loan

02/18/2020 08:57 PM
CNA file photo
CNA file photo

Taipei, Feb. 18 (CNA) Hon Hai Precision Industry Co. founder Terry Gou (郭台銘) has pledged more than 400 million shares of the company as collateral for a new loan of about NT$24 billion (US$800 million) in total, according to the Taiwan Stock Exchange (TWSE).

Data released Monday by the TWSE, where Hon Hai shares are traded, showed that Gou had put up 436 million Hon Hai shares as collateral at Cathay United Bank, CTBC Bank and Taishin International Bank on Jan. 20.

Based on the stock's closing price of NT$92.3 Monday, the collateral was around NT$40.24 billion, which would allow Gou to borrow about NT$24.14 billion -- 60 percent of the value - in line with practices in the local banking sector, analysts said.

Hon Hai's filing with the TWSE did not disclose the purpose of the loan, but according to local news media, the money will be used to set up a venture capital fund.

In January, Gou said at a Hon Hai charity event that he was planning to establish a huge venture capital fund to finance innovative tech start-ups globally.

Last December, Gou said in a LINE post that he had met with Peter Thiel, co-founder of PayPal and a prominent venture capitalist in Silicon Valley, with the goal of building cooperation on industrial development in Taiwan.

It is important that Hon Hai, the world's largest contract electronics maker, maintains its standing and expands its global outreach, Gou said.

According to market analysts, whenever Gou uses Hon Hai shares as collateral to obtain a large loan, it is for the purpose of making big investments.

For example, when he borrowed about NT$21.75 billion in January 2017, using 430 million Hon Hai shares as collateral, it was believed to have been for investment in the Japanese flat panel maker Sakai Display Products Corp. (SDP), according to analysts.

With Gou's latest loan, banks are currently holding about 83.5 percent of his 9.65 percent stake in Hon Hai as collateral, which totals about 1.18 billion shares, according to the TWSE.

(By Chung Jung-feng and Frances Huang)

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