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Why Catapult Group International Ltd shares have soared today

Catapult Group International Ltd’s (ASX: CAT) plan to raise capital in order to acquire two foreign businesses has been well received by the market.

Investors have bid the share price up by 4.2% late in the session, although they did rise as much as 7.6% to a high of $4.09 shortly after the market opened this morning.

Catapult Group, which provides the software and hardware used by athletes and sports teams around the world to track performance and monitor the risk of injuries, confirmed the successful completion of the institutional component of its entitlement offer this morning.

The company raised $91 million with new shares sold for $3, which represents a massive 21% discount to Tuesday’s closing price.

Importantly, retail investors will also be given the opportunity to buy new shares in the company for the same price. For every 10.65 shares eligible investors own, they can buy one new share with the offer commencing on 20 July 2016, and ending 5:00pm (Melbourne time) on 4 August, 2016.

The Retail Entitlement Offer Booklet is expected to be released by the company on 20 July. Investors should read it thoroughly.

You can read more about Catapult’s acquisition of both XOS Technologies and Kodaplay Limited (which is trading as PLAYERTEK) here.

Catapult is a great business, and one I expect has plenty of growth still ahead of it. The reason I don’t own shares, however, is that I do have my reservations regarding the company’s valuation. I’ve certainly been proven wrong thus far (and it is still near the top of my watch list!), but investors do still need to consider the price they’re paying for the company.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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