iDreamSky Technology Holdings Ltd (HKG:1119) saw its stock price surge by 5.66% during intraday trading on Tuesday, following the announcement of a strategic share issuance. The company revealed plans to issue 38.1 million new shares at HK$1.024 per share to PLR Worldwide Sales Limited, a subsidiary of Playrix Holdings and developer of popular games like Gardenscapes.

The share issuance, which represents 2.16% of the company's issued share capital, is aimed at offsetting $5 million in royalty fees owed by iDreamSky's Shenzhen affiliate. This move is seen as a strategic decision to conserve cash while simultaneously strengthening ties with upstream developers. PLR Worldwide Sales Limited is set to become a strategic shareholder through this capitalization agreement.

Investors appear to view this development positively, as it demonstrates iDreamSky's ability to manage its financial obligations creatively while fostering important industry relationships. However, the company has advised shareholders and potential investors to exercise caution, noting that the capitalization remains subject to certain conditions and may or may not proceed to completion. The market's enthusiastic response suggests confidence in iDreamSky's strategic direction and potential for future growth in the competitive mobile gaming industry.