Capital Raising and Share Purchase Plan: Is Bigger, the better?

  • Jul 08, 2020 AEST
  • Team Kalkine
Capital Raising and Share Purchase Plan: Is Bigger, the better?

Summary

  • Companies raise equity at times of uncertainty to improve their balance sheets for dealing with cash requirements, the impact of ongoing tragedy on the operations etc.
  • Kogan.com raised A$20 million through completion of the share purchase plan.
  • Afterpay raised A$650 million via Institutional Placement, co-founders sell-down ~4 million shares.
  • Temple & Webster has successfully completed placement of nearly A$40 million.

Capital raising generally suggests that a company is offering more shares to its existing as well as new investors and this often takes in the form of a share purchase plan (SPP), pro-rata entitlement offer, institutional offer, private placement etc. A company raises capital for adding cash to its balance sheet, to acquire, pay down debt or if the company is burning through cash for its survival.

During the unprecedented times, companies increase their equity raising activities for adding cash to their balance sheets for dealing with the effect of ongoing tragedy on the operations of company, to help them meet up their expenditures.

HAVE YOU READ: Capital Raising During Crisis Scenario

At the time of COVID-19 pandemic, several firms are going for financial arrangements along with mitigating actions to cope with the cost base and cash flow to equip them with sufficient liquidity. Capital raising provides companies with a better chance for navigating through the period of crisis by helping them to offset the liquidity crunch. At the moment, companies are undergoing increased burden for retaining liquidity and sound financial situation as due to the ongoing pandemic they are at a standstill. But raising capital to meet the company operations may come at a very high cost in terms of both the governance and financial and leads to dilution of current shareholders value.

With this backdrop, let us discuss three ASX-listed companies which recently raised capital-KGN, APT, TPW

Kogan.com Raised A$20 Million Via SPP Completion

ASX-listed leading Australian consumer brand Kogan.com Limited (ASX:KGN) operates a portfolio of retail & services businesses that comprises Kogan Retail, Kogan Mobile, Kogan Marketplace, Kogan Insurance, Kogan Internet, Kogan Money, Kogan Energy, Kogan Travel, and Kogan Cars. KGN focuses on making in-demand services as well as products more accessible & affordable.

On 8 July 2020, Kogan.com disclosed that the SPP (share purchase plan) that was revealed on 10 June 2020 to the market, has closed on 3 July 2020 and was oversubscribed.

The SPP was open to 13,015 eligible shareholders, and valid applications for A$115,283,000 proceeds were received from nearly 6,793 eligible shareholders indicating a participation rate of ~52.19% and an average application amount of roughly A$16,970.

Due to the strong support provided by eligible shareholders, the company has decided to raise the SPP size by A$5 million above its original target of A$15 million, raising a total of A$20 million.

On 11 June 2020, the company stated completion of nearly A$100 million institutional placement at A$11.45 price per share, supported by both its existing shareholders as well as new investors. Kogan.com mentioned that the profits from this placement would be utilized to support the financial flexibility for quick action on value accretive opportunities in future.

Stock Performance: On 8 July 2020, KGN stock quoted at A$16.46 dwindled by 1.614%. In the last three months, Kogan.com has outperformed and delivered an exceptional return of 179.30%. The market cap of KGN remained at A$1.73 billion, with 103.53 million shares trading on ASX.

Afterpay Raised A$650 million via Institutional Placement

An ASX-listed leader in BNPL industry Afterpay Limited (ASX:APT) is a retail technology company having operations in Australia, New Zealand, the UK, and the US. The company is working with the main aim of making purchasing feel great for a global customer base. Afterpay offers an interest-free instalment payment service for customers who pay on time.

On 8 July 2020, Afterpay revealed that it has successfully completed a fully underwritten institutional placement of nearly 9.8 million shares at a per-share price of A$66.00, to raise approximately A$650 million. Afterpay mentioned that this placement was strongly endorsed by its existing as well as new shareholders.

As previously disclosed, APT will offer its eligible shareholders the opportunity for purchasing new shares in Afterpay under a share purchase plan (SPP) at a price which is lower of either the placement issue price of A$66.00 or 5 day VWAP upto the SPP closing date. This share purchase plan intends to raise gross proceeds of A$150 million.

The company stated that proceeds of this capital raise would be used to accelerate investment in increasing underlying sales and to prioritise global expansion in the short term for boosting shareholder value in the longer term.

Co-founders sell-down ~4 million shares

Afterpay also disclosed as part of the institutional bookbuild, it’s co-founders have sold nearly 2.05 million shares each at the per-share placement price of A$66.00, with a commitment not to sell further shares until 2020 AGM takes place.

Stock Performance: On 8 July 2020, APT closed at A$66.00 down by 2.941%. APT has delivered an outstanding return of 237.97% in the last three months and excellent return of 126.74% in the previous six months. With approximately A$18.23 billion as market capitalisation, APT has nearly 268.06 million shares trading on the Australian stock exchange.  

Temple & Webster Successfully Completes A$40 million Placement

An Australia-based online retailer Temple & Webster Group Ltd (ASX:TPW) provides furniture and homewares and has more than 180,000 products on sale from hundreds of suppliers. The company operates an innovative drop-shipping model to send products directly to customers by suppliers and hence enables faster delivery times as well as reduce the necessity to hold inventory.

On 2 July 2020, Temple & Webster revealed successful completion of its fully underwritten A$40 million institutional placement through the issue of nearly 7.0 million new fully paid ordinary shares at a per-share offer price of A$5.70.

TPW stated that the placement was substantially oversubscribed with strong demand from domestic as well as international institutions, including both new investors and existing shareholders.

Moreover, with a robust balance sheet, Temple & Webster is well-placed to capitalise on the ongoing structural shift from offline to online for furniture along with homewares, and now the company has further financial flexibility for investing in its development strategy.

Stock Performance: TPW stock closed at A$7.000 up by 2.79% on 8 July 2020. The stock has outperformed in the last three months and delivered 140.64% exceptional return. The market cap of TPW stands at A$820.11 million with nearly 120.43 million shares trading on ASX.

 


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