DEF: Wetouch Technology Inc. Seeks Shareholder Approval for Stock Issuance

Wetouch Technology Inc. is holding a special meeting on September 4, 2026, to seek shareholder approval for the issuance of common stock to Qixun Technology and Qihong Technology, which will significantly increase the beneficial ownership of CEO Guangde Cai.

Summary

• Wetouch Technology Inc. is convening a special meeting of stockholders on September 4, 2026, to vote on the proposed issuance of common stock to Qixun Technology (Samoa) Limited and Qihong Technology (Samoa) Limited.
• This issuance is required to comply with Nasdaq Listing Rule 5635(b) concerning the issuance of securities that could result in a change of control.
• The proposed issuance will increase the beneficial ownership of CEO Guangde Cai and his affiliates from approximately 5.954% to an estimated 70.19% of the outstanding common stock.
• The company states the proceeds from the share purchase agreements, priced at $1.25 per share, will be used for in-house development or acquisition of touch-screen complete systems.
• The Board of Directors recommends a vote in favor of the issuance proposal, citing limited alternative financing opportunities and the need for capital to expand the business.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a neutral to slightly negative sentiment due to the significant dilution and increased control by a single individual, despite the stated need for capital.

Positives

• The company is seeking to secure capital for business expansion through the development or acquisition of touch-screen systems.
• The share purchase price of $1.25 per share is higher than the Nasdaq Minimum Price ($1.19 as of July 30, 2026, and $1.246 average over five days).
• The Board of Directors unanimously recommends approval of the issuance proposal.
• The company is utilizing the internet for proxy material distribution to reduce costs and environmental impact.

Negatives

• The proposed issuance will result in significant voting dilution for existing shareholders.
• The issuance will lead to a concentration of ownership, with CEO Guangde Cai and his affiliates potentially controlling approximately 70.19% of the outstanding common stock.
• This concentration of ownership may delay or prevent a change of control or changes in management.
• The company may be deemed a 'controlled company' by Nasdaq, potentially reducing independence requirements for its Board of Directors and committees.
• Sales of a substantial number of shares by Mr. Cai or the perception of such sales could depress the market price of the common stock.
• The increased concentration of ownership may limit the public float and make it more difficult for investors to sell shares at an appropriate price, potentially increasing stock price volatility.

Risks

• If the Issuance Proposal is not approved, the company may be unable to consummate the transactions, renegotiate terms, seek alternative financing, or raise capital on similar terms, potentially limiting business growth.
• The concentration of ownership by Mr. Guangde Cai and his affiliates could have the effect of delaying or preventing a change of control or changes in management.
• The potential for Mr. Cai and his affiliates to influence the outcome of transactions that other stockholders may not support, such as mergers or asset sales.
• The company may be deemed a controlled company by Nasdaq, impacting board and committee independence requirements.
• Sales of a substantial number of shares by Mr. Cai or the perception of such sales could depress the market price of the common stock.
• The concentration of ownership may limit the public float, potentially increasing stock price volatility and making it harder for investors to sell shares.

Future Outlook

The company intends to use the proceeds from the share issuance for in-house development or acquisition of touch-screen complete systems. The approval of the issuance is considered crucial for the company's ability to raise capital and manage/grow its business.

Management Comments

• "We are following Securities and Exchange Commission rules which enable us to provide proxy materials for the Special Meeting on the Internet instead of automatically mailing printed copies. This allows us to provide our stockholders with the information they need, while lowering the cost of the delivery of materials and reducing the environmental impact from printing, mailing and disposing of paper copies."
• "Whether or not you plan to attend the meeting, please vote as soon as possible. You can vote by returning the proxy card in the enclosed postage-prepaid envelope. This will ensure that your shares will be represented and voted at the meeting, even if you do not attend."
• "The Board of Directors concluded that there were limited alternative financing opportunities that would provide the Company with the required capital on a timely basis, and the market price and trading volume of the Companys Common Stock, and as such the issuances were in the best interests of our Company and our stockholders."
• "The Share Purchase Agreements have provided our Company with a significant amount of capital resources that have facilitated the expansion of our business."

Industry Context

StockSavvy.ai notes that Nasdaq Listing Rule 5635 requires shareholder approval for issuances that could result in a change of control or a significant dilution. This filing addresses such a scenario, where a substantial stock issuance will consolidate control with a key insider, a common practice for companies seeking capital but often scrutinized for its impact on minority shareholders.

Comparison to Industry Standards

• Nasdaq Listing Rule 5635(b) requires stockholder approval for issuances that result in a change of control, typically defined as an investor owning 20% or more of outstanding shares or voting power.
• The proposed issuance to Qixun and Qihong would result in Mr. Guangde Cai and his affiliates owning approximately 70.19% of the outstanding common stock, significantly exceeding the 20% threshold that triggers Nasdaq's change of control provision.
• Companies often seek shareholder approval for significant stock issuances to comply with exchange rules and to signal transparency, even when the primary beneficiary is an existing insider.
• The share purchase price of $1.25 is above the recent market prices ($1.19 and $1.246 average), which is generally viewed favorably as it suggests a premium or at least a fair valuation in the context of the transaction.

Corporate Governance

Related Party Transactions

• The issuance of shares to Qixun Technology (Samoa) Limited and Qihong Technology (Samoa) Limited, which are controlled by Mr. Guangde Cai, the founder, CEO, and director of Wetouch Technology Inc.
• Mr. Guangde Cai is the sole shareholder and director of Haobote (owner of Qixun) and Sichuan Weiyida Trading Co., Ltd (owner of Qihong).
• Mr. Cai also personally owns shares and has an affiliate that owns shares, consolidating his beneficial ownership significantly.

Stakeholder Impact

• Shareholders will experience significant voting dilution, reducing their proportional voting power.
• Minority shareholders may have less influence on corporate decisions and board composition.
• The concentration of control could lead to decisions that benefit the controlling shareholder more than other shareholders.
• The potential for increased stock price volatility and difficulty in selling shares at desired prices for existing shareholders.
• Employees and creditors may be indirectly impacted by changes in corporate control and strategic direction.

Next Steps

• Stockholders to vote on the Issuance Proposal at the Special Meeting on September 4, 2026.
• If approved, the company will issue shares to Qixun Technology and Qihong Technology.
• Preliminary voting results will be announced at the Special Meeting.
• Final voting results will be disclosed on a Current Report on Form 8-K filed with the SEC within four business days after the Special Meeting.

Key Dates

Recommendation

The filing indicates a need for capital and compliance with Nasdaq rules, but the significant dilution and consolidation of control with an insider present substantial risks for minority shareholders. While the capital is needed for growth, the terms and control implications warrant a cautious 'hold' stance until further clarity on the use of proceeds and future strategic direction is provided.

Keywords

stock issuance, shareholder approval, Nasdaq Listing Rule, change of control, dilution, capital raise, common stock, proxy statement