HONG KONG (Reuters) – ZTE Corp said it was looking to raise 11.51 billion yuan ($1.7 billion) from a private placement of A shares, and that it plans to use the proceeds for research and development (R&D) of 5G networks as well as working capital.

The Chinese telecom equipment maker said on Thursday it planned to issue 381.098 million A shares, or 8.27% of the total issued share capital on completion of the deal, to independent third investors at 30.21 yuan apiece.

That represents a discount of 18.2% to ZTE’s A-share closing price of 36.92 yuan in Shenzhen on Wednesday.

The A shares, which are subject to a lock-up period of 12 months from the date of listing, will be issued to 10 independent professional or institutional investors in China.

None of the subscribers will become a substantial shareholder upon completion of the share sale, the company said, without providing further .

The company had not responded to an email request for comment on details and identity of the investors.

“We believe the successful fund raising will remove a key overhang for the stock, and would investors more confidence in ZTE’s R&D efforts and thus potential share gain in 5G,” brokerage Jefferies said in a research note.

“Our fundamental view negative, but near-term stock price could have support,” Jefferies said, it worried about margin pressure and market share pressure on 5G.

ZTE’s Shenzhen-listed shares rose as much as 4% to 38.10 yuan in early trade. Hong Kong-listed stock briefly rose 3.7% to HK$28.05, the highest since March 2018.

“It is because of the lock up period which give investors confidence of a stable stock price during the period, and that support the shares from advancing despite the discount,” said Steven Leung, a sales director at UOB Kay Hian in Hong Kong.

“Its a vote of confidence to the prospect of 5G and related companies,” Leung added.

ZTE said the deal will enable it to maintain its high level of investment in R&D, ensure its technological competitive , develop its main products and businesses, as well as help increase its market share in the markets.

(Reporting by Donny Kwok; Editing by Himani Sarkar and Shailesh Kuber)

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