DNK Stock Price Increases Over 74%: Why It Happened

By Amit Chowdhry ● November 18, 2020
  • Shares of Phoenix Tree Holdings Ltd (NYSE: DNK) are trading up 74.57% ($4.05 per share compared to a previous close of $2.32). This is why the stock price jumped.

Shares of Phoenix Tree Holdings Ltd (NYSE: DNK) — which is a company also known as Danke — are trading up 74.57% ($4.05 per share compared to a previous close of $2.32) today. What triggered the stock price surge is a report by Chinese media outlet Thepaper.cn saying that 5I5J Holding Group (owner of Danke’s rival Xiangyu) is in takeover to buy Danke.

There have been reports that Danke was pursuing bankruptcy, but the company denied those reports on its Weibo account earlier this week, according to South China Morning Post. One of the reasons why there is speculation about Danke filing for bankruptcy is due to upfront payments being collected from Danke tenants, but there was a failure to pay the landlords. This is why tenants and landlords protested at Danke offices last weekend.

A number of unpaid landlords ended their contracts with Danke due to this issue. And some tenants were evicted as homeless users were still paying back the initial rental loan to Danke partner bank WeBank. WeBank — which is backed by Tencent Holdings — said it is going to help the renters resolve the loan disputes and their credit scores would not be affected at least before the end of March.

Danke’s business model has been compared to WeWork, but for residential properties instead of office space. Apartments are centered from landlords on a long-term basis. These properties are split into smaller units and subleased to tenants. As of the end of March, Danke was operating over 415,000 flats across 13 cities.

During the first quarter of the year, Danke reported a net loss of 1.2 billion yuan — which was 51% wider than the loss reported a year earlier. And the net loss for the whole year 2019 was 3.4 billion yuan.