The Latest: China’s leading online travel agent Trip.com Group Ltd. (9961.HK; TCOM.US) announced on Wednesday that it plans to issue $1.3 billion of convertible senior notes due 2029, with an option to issue up to an additional $200 million principal amount of the notes.

Looking Up: This issuance of convertible notes allows the company to obtain a large amount of capital at only 0.75% per annum. In addition, it will help reduce the company’s debt ratio if investors convert the notes into stock at maturity.

Take Note: If investors convert the convertible notes into shares, this will result in an expansion of the company’s share capital and dilution of existing shareholders’ equity.

Digging Deeper: Like many travel- and tourism-related companies, Trip.com suffered big revenue hits at the height of the pandemic, and recorded losses in 2020 and 2021. But its business is rebounding with the pandemic’s end, and returning to significant growth last year with the lifting of China’s pandemic restrictions. Entering the first quarter of 2024, its revenue and earnings grew by 29% and 27.8%, respectively, driven by favorable performance in transport ticketing and accommodation bookings.

Market Reaction: Trip.com’s shares fell on Wednesday and closed down 0.9% at HK$404.6 by the midday break. The stock now trades near the lower end of its 52-week range.

Translation by A. Au

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