Recon Technology, Ltd. (RCON) ended Monday 12% higher thanks to news that it has raised equity ownership in FGS to 51%. The better news is that it was extending gains, moving up over 20% in the after-hours trading. In the last one month, the stock experienced an increase of 62.05%, but extending that to three months, it has an increase of 149.07%, and its price is 20.09 % up in the past five days. If we calculate the stock’s price volatility over the past week and the past month, it results in 11.17% over the past week and 16.37% over the past month.
On February 4, 2021, Recon Technology and two of its subsidiaries acquired approximately 8% ownership stake in Future Gas Station (Beijing) Technology, Ltd. through a fourth supplemental agreement to the original investment agreement with FGS and its founding shareholders. The transaction with FGS has been closed, and about 51% of FGS will now belong to FGS, and the Company will immediately begin to consolidate FGS’s financial results starting January 2021, which will reflect in the Company’s year-end results.
FGS works with gas stations to provide new technical applications and data operations. The Company acquired an 8% equity stake in FGS pursuant to the subscription agreement it entered with FGS on December 15, 2017.
On August 21, 2018, FGS and the other shareholders of FGS reached a settlement agreement, which the Company and FGS entered into.FGS was required to make an investment of RMB 10 million in the Company and issue 487,060 restricted shares of Recon as compensation. On a five-for-one reverse stock split, the Company’s ownership interest was increased to 43% from 9%. There were lock-up conditions tied to certain performance goals for the restricted shares.
The parties extended the lock-up conditions and deadlines to meet the associated performance goals in the second and third supplemental agreements that were signed in 2019 and 2020.
Through the fourth supplemental agreement, FGS waived the requirement about gas station numbers in FGS’s performance goal.
The Company has agreed to pay for the balance in exchange for an additional 8% equity interest in FGS. Therefore, the Company has canceled the lock-up conditions related to the restricted shares and paid the balance of their investment.
As of January 31, 2021, FGS’ mobile application and the accompanying mini-programs on WeChat and Alipay accumulated a gross merchandise volume of over RMB4.34 billion ($674 million). FGS had registered more than 5.1 million users. About 45% of registered users ordered more than once through the FGS system.
The average order amount that the FGS users paid for the requested product between the date of the initial investment in December 2017 and the date of the Company’s most recent investment in January 2021 is about RMB217.00 (approximately $33.6).