Z.AI raises $5 billion through Hong Kong equity and bond offering

Beijing-based artificial intelligence company Z.AI Co Ltd has launched a combined $5 billion capital raise through Hong Kong markets, splitting the offering between a $2 billion share placement and a $3 billion convertible bond sale, according to term sheets reviewed by Reuters.

The dual offering represents one of the largest capital raises by a Chinese AI company this year, coming as the sector faces intensifying competition and mounting infrastructure costs.

Deal structure and pricing

Z.AI is offering 21.97 million new Hong Kong shares at HK$714 ($91.05) each, representing a 10% discount to the company's Friday closing price of HK$793. The share placement is structured to attract institutional investors while minimizing dilution for existing shareholders.

The concurrent convertible bond sale totals 20.14 billion yuan ($3 billion) in zero-coupon bonds maturing in September 2027. The bonds will be issued at 100% to 100.5% of face value, yielding between negative 0.5% and zero percent. The initial conversion price is set at HK$892.50, a 25% premium above the share placement price.

Z.AI retains the option to redeem all outstanding bonds starting February 18, 2027, if its shares trade at or above 130% of the conversion price for 20 out of 30 consecutive trading days. This redemption provision gives the company flexibility to retire the debt if its stock performs strongly.

Why it matters

The substantial capital raise underscores the massive funding requirements facing AI companies as they scale operations and compete for computing resources. Z.AI's willingness to accept zero or negative yields on its convertible bonds reflects strong investor appetite for exposure to Chinese AI growth, even at premium valuations. The dual-track structure also provides the company with immediate equity capital while preserving the option for bondholders to convert if the stock appreciates significantly.

Deployment of proceeds

According to the term sheets, Z.AI plans to allocate proceeds across several strategic priorities. Research and development will receive substantial funding, along with investments in computing resources and related infrastructure—critical components for training and deploying large-scale AI models.

The company also intends to use capital for business expansion, strategic investments, potential acquisitions, working capital, and general corporate purposes. This broad allocation strategy suggests Z.AI is positioning for both organic growth and opportunistic M&A activity.

The share placement and bond sale are being conducted simultaneously but are structured as independent transactions, meaning neither depends on the other closing successfully.

Z.AI did not immediately respond to requests for comment outside office hours, Reuters reported. The details were first reported by Reuters correspondent Yantoultra Ngui.