GDS Holdings Ltd (09698.HK), a leading developer and operator of high-performance data centers in China, saw its stock price plummet by 7.27% in pre-market trading on Wednesday. The sharp decline comes on the heels of the company's announcement of a significant capital raising effort through a public offering of American Depositary Shares (ADSs) and a convertible senior notes offering.

According to the company's filings, GDS Holdings plans to offer 5.2 million American Depositary Shares, with the size of the offering not yet disclosed. Additionally, the company announced a proposed offering of US$450 million in convertible senior notes. GDS Holdings stated that the proceeds from these offerings would be used for working capital and debt refinancing purposes, indicating a strategic move to strengthen its financial position.

The market's negative reaction to this news is likely due to concerns about potential dilution of existing shareholders' stakes. The issuance of new shares through the ADS offering and the potential conversion of the senior notes into equity could increase the total number of outstanding shares, thereby reducing the ownership percentage of current shareholders. Moreover, the additional debt from the convertible notes might raise concerns about the company's leverage and future financial obligations.