Zhitong Finance App News, Seventh Avenue (00797) issued an announcement. On March 28, 2024, Shenzhen Seventh Avenue signed a sale agreement with the buyer Shanghai Canghuo Network. Shenzhen Seventh Avenue agreed to sell and the buyer agreed to buy the sale shares at a cost of RMB 14.85 million, subject to the terms and conditions of the sale agreement. The sale shares are equivalent to the total registered share capital of the target company Shanghai Lingsu Network.
After the sale is completed, the Group will no longer have any interest in the target company, and the target company will no longer be recorded as a subsidiary of the Company.
The target company borrowed money from a number of financial institutions before the sale was completed. The loan is secured by the group as the beneficiary of the guarantee. The loan will not be repaid on or before the sale is completed, and the Group will continue to guarantee the target company for a period of time after the sale is completed. Such guarantees constitute financial support provided by the company to the target company.
On the date of signing, the target company owed money to the Group. The arrears will not be repaid to the Group until the sale is completed and will constitute financial support provided by the Group to the target company.
The target company mainly operates the Group's cloud computing and other related service businesses. Since 2022, the rapid development of computational graphics processor (GPUs) technology, the impact of the COVID-19 pandemic on the Group's cloud computing business promotion process, and changes in customer demand have caused target companies' cloud computing business to continue to lose money. Net losses after tax were approximately RMB62.9 million and RMB148 million for the year ended 31 December 2022 and 2023, respectively. Furthermore, the target company's assets such as servers can no longer keep up with technological progress, deviate from the demand in the mainstream cloud computing market, and related assets have experienced significant depreciation. Although the Group's cloud computing operation team has formulated plans to reverse this unfavorable situation, the group management team believes that without further investment in large resources to the target company, the continuous loss state of the cloud computing business will continue to be maintained, and further investing large amounts of resources into the target company is not the Group's best choice in the current situation where the cloud computing business continues to lose money. Therefore, the company believes that it is more in the overall interests of the company and shareholders to sell the target company to avoid further losses.