HIT Loan Activities

[brittlerock]

For background, on 8/12 I sent the following inquiry to HIT IR:

“In Oct 2023 the company loaned 800k to an opaque entity in Hong Kong at 8%. Then 4 months later the company took out a 1.6M dollar loan at 40% (annualized rate).

I just don’t understand why a small company growing at a torrid pace would see fit to lend money to an opaque foreign entity at a meager 8% rather than using the money internally to fuel growth.

And then to make matters worse, only 4 months after making this loan, twice as much was borrowed at a rate five times greater than the loan.

Would you please help me understand what is going on here? It just seems very dubious to me.”

Kristy Li of HIT IR replied to my email the next day, Aug 13. She set up a video conference call between herself, Julia Qian, CFO, and myself.

Today, Aug 18, I just got off the video conference call. The meeting utilized MS-Teams which unfortunately generated a lot of audio distortion making it difficult to understand the conversation at times. While Kristy organized the meeting, she had little to say during the meeting. As such, it was pretty much a meeting between Julia and myself.

I’ll start with the $800K, 8%, 3 year loan to a Hong Kong based BDC. The money was lent in May ‘23 when the going rate for such loans was closer to 4%. Though Julia is Chinese, she had no prior familiarity with this entity. They were introduced to HIT by one of their original institutional financiers prior to their IPO on Christmas of ‘24.

The Hong Kong entity had a number of established health insurance business contacts in Europe and the UK. The loan was utilized primarily to finance efforts related to securing introductions between HIT and the insurance business contacts. The Hong Kong entity has been paying interest only with the principal due as a balloon in May ‘26. Julia said that they felt that lending the money was a very beneficial arrangement as opposed to paying them a fee for service.

Moving on to the $1.6M loan. HIT borrowed the money in order to acquire the rights to collect the accounts receivable of one or more the insurance providers with which they were doing business. Unfortunately, there was a lot of audio distortion on the call while this was being explained to me. I am quite certain that the money was used to acquire the right to collect the AR of another business.

I am less certain about what relationship HIT had the other business(es) involved. Nevertheless, Julia told me that the loan had been fully paid off prior to their IPO.

At this time HIT is profitable and they have zero debt. HIT has 80 full time employees.

[DoctorRob]

Thanks for your hard work and for reporting back, @brittlerock . It’s a great reminder that as shareholders we are part owners of these companies, and we are able to reach out to IR for questions and concerns.

[wpr101]

This seems very encouraging that the CFO was willing to hop on a call and look to explain those loans from the S1. It sounds like maybe we did not get 100% of questions answered, but from my standpoint I am willing to look past this concern.

---

I found something interesting on Robinhood regarding insider buys and sells. There has not been a single insider sell since going public, and there are a number of insider buys from directors at the company. Robinhood lists these as “Uninformative Buy” or “Automatic Buy” so it is possibly not a strong signal but still good to see.

We do not see this part of Saul’s playbook come into practice too often, but Saul did mention this on insider buys sometime back in the Knowledge Base (part 2),

Heavy insider buying is something else again. It’s much rarer, and much more indicative.

This insider buying may not be “heavy” insider buying. However, I do think some of those Directors could be seeing what we are seeing: a booming business that had its share price chopped down.