SCHEDULE: XJ Harbour Boosts SCHMID Group Stake to 25.6%

XJ Harbour HK Limited and its affiliates have increased their beneficial ownership in SCHMID Group N.V. to 25.6% through a series of share issuances and a debt-for-equity swap.

Summary

• XJ Harbour HK Limited and its affiliates now beneficially own 12,951,199 Class A Ordinary Shares of SCHMID Group N.V., representing 25.6% of the outstanding shares.
• This ownership stems from an initial issuance of 1,406,361 shares on April 30, 2024, as part of a business combination, in exchange for equity interests in SCHMID Technology Guangdong Co., Ltd.
• An initial cash payment of EUR 10 million was made to XJ Harbour on the closing date of the business combination, with a remaining EUR 20 million becoming due.
• The original subscription agreement was amended on April 29, 2024, to split a EUR 10 million payment into two installments of EUR 5 million each, with the second installment due within 30 days post-closing.
• On January 16, 2026, an additional 12,540,539 Class A Ordinary Shares were issued to XJ Harbour to satisfy an outstanding debt of USD 26,962,158.90 (representing the remaining EUR 20 million plus accrued interest).
• The percentage ownership calculation excludes 5,000,000 earn-out shares without voting rights and 21,000,000 outstanding warrants held by other shareholders.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this filing with caution. While the resolution of an outstanding debt through equity conversion removes a liability, the significant dilution and ongoing potential for further dilution from other financing arrangements suggest underlying financial pressures for SCHMID Group N.V.

Positives

• XJ Harbour's increased stake demonstrates continued commitment and confidence in SCHMID Group N.V.
• The debt-for-equity swap resolves an outstanding cash payment obligation for SCHMID Group N.V., improving its cash position.

Negatives

• Significant dilution for existing shareholders due to the issuance of 12,540,539 new shares to satisfy a debt.
• The need for a debt-for-equity swap suggests potential liquidity challenges or a preference to conserve cash for SCHMID Group N.V.

Risks

• Potential future dilution from the conversion of a EUR 2.5 million drawn under a financing facility with Black Forest Special Situations I (December 2025).
• Potential future dilution from the conversion of a USD 30 million convertible bond and warrants announced on January 20, 2026.
• The Reporting Persons reserve the right to dispose of some or all of their Class A Ordinary Shares, which could impact share price.

Future Outlook

The Issuer has announced a potential EUR 2.5 million financing facility conversion and a USD 30 million convertible bond and warrants, which could lead to further share dilution. The Reporting Persons intend to continually review their investment and may dispose of shares in the future.

Management Comments

• "The provisions of the Original Agreement shall, save as amended by this Amendment Agreement, continue in full force and effect."
• "The Reporting Persons intend to continually review their investment in the Issuer and may, from time to time, determine to dispose of some or all of their Class A Ordinary Shares, whether in open market transactions, privately negotiated transactions, or otherwise, subject to applicable law."

Industry Context

StockSavvy.ai notes that debt-for-equity swaps are common mechanisms for companies to manage liquidity and reduce debt burden, especially in growth-oriented or capital-intensive sectors. While it can strengthen the balance sheet by converting liabilities to equity, it often comes at the cost of shareholder dilution. The continued investment by XJ Harbour, a significant shareholder, could be seen as a vote of confidence, but the underlying need for such a swap warrants closer examination of the company's financial health and capital structure.

Comparison to Industry Standards

• The 25.6% stake held by XJ Harbour is a substantial minority interest, often indicative of a strategic investor seeking influence or a long-term partnership. For example, in the SPAC merger context, anchor investors often take significant stakes.
• The debt-for-equity conversion of USD 26.96 million is a notable event, comparable to similar transactions seen in companies like WeWork or Hertz during their restructuring phases, where debt holders converted their claims into equity to support the company's financial stability, albeit at a potentially lower valuation for existing equity.
• The potential for further dilution from the EUR 2.5 million Black Forest facility and USD 30 million convertible bond suggests a pattern of capital raises that could be higher than industry averages for mature companies, but potentially in line with high-growth or restructuring entities.

Corporate Governance

Related Party Transactions

• The issuance of 1,406,361 Class A Ordinary Shares to XJ Harbour in exchange for its equity interest in SCHMID Technology Guangdong Co., Ltd., a subsidiary of the Issuer, is a related party transaction.
• The subsequent issuance of 12,540,539 Class A Ordinary Shares to XJ Harbour to satisfy an outstanding debt of USD 26,962,158.90 is a related party transaction.

Stakeholder Impact

• Shareholders: Significant dilution for existing shareholders due to the issuance of new shares to satisfy debt. Potential for further dilution from future conversions.
• Creditors (XJ Harbour): XJ Harbour, as a creditor for the EUR 20 million payment, has converted its claim into equity, becoming a larger shareholder.
• Company (SCHMID Group N.V.): Improves cash flow by converting a cash obligation into equity, but at the cost of increased share count and potential future dilution.

Next Steps

• TopCo will ensure the Subscribed Shares are registered for resale to the public simultaneously with any other registered shares.
• The Issuer agreed to duly register the 12,540,539 Class A Ordinary Shares issued to XJ Harbour under the U.S. Securities Act of 1933, including filing Form F-1 and making efforts for it to be declared effective.
• Reporting Persons will continually review their investment and may dispose of shares.

Key Dates

Recommendation

The filing presents a mixed bag. While the resolution of a significant outstanding debt through a debt-for-equity swap is positive for the company's balance sheet and cash flow, the substantial dilution for existing shareholders and the mention of further potential dilution from other financing facilities are concerning. The increased stake by XJ Harbour could be seen as a vote of confidence, but the underlying reasons for the debt-for-equity swap suggest financial pressures. A "hold" recommendation is appropriate as investors should monitor the company's operational performance and future capital structure adjustments before making further investment decisions.

Keywords

SCHMID Group N.V., XJ Harbour HK Limited, Schedule 13D, beneficial ownership, equity swap, debt conversion, SPAC, business combination, share issuance, dilution, corporate governance