Diversified automotive company AMA Group Ltd (ASX: AMA) has emerged from a trading halt today following a "significant capital raising" which was announced on Tuesday morning.
In a market sensitive announcement made this morning, the vehicle protection company said that it has successfully completed the placement of 75 million shares at 60 cents per unit (a 6.3% discount to their previous closing price), raising a total of $45 million. That exceeds the placement of 66.6 million shares and $40 million capital raising that was initially reported by The Australian on Tuesday.
Commenting on the raising, the company said: "Whilst demand for the issue significantly exceeded $45 million, the directors deemed it prudent to limit the raising."
And rightly so, considering the new shares were only offered to institutions in the form of a placement. Minority shareholders were not given the same opportunity to purchase shares at the discount offered and have thus had their ownership significantly diluted. Indeed, a $45 million capital raising for a company with a market value of just $214 million will have that effect.
Nevertheless, the funds raised through the placement will be applied to financing growth initiatives (e.g. future acquisitions) and meeting ongoing working capital requirements which will hopefully enable management to grow earnings considerably over the coming years.
Given that the company had a cash balance of just over $0.5 million as at 31 December 2014, a capital raising was always very possible although, as previously mentioned, it should have treated minority shareholders with more respect.
The stock fell 4.7% to trade at 61 cents early in the session.
