Crash: Why the Freedom Foods Group Ltd share price is down 9%

Freedom Foods Group Ltd (ASX:FNP) shares have emerged from a trading halt and fallen by more than 7%.

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Watch out below! The Freedom Foods Group Ltd (ASX: FNP) share price has fallen more than 9% this morning.

Source: Google Finance
Source: Google Finance

What happened?

Following an announcement of a capital raising to fund four acquisitions, Freedom Foods shares entered a trading halt on Wednesday. The diversified foods company said it would raise a total of $75 million, with $10 million issued to new institutions and the rest left over for current shareholders to fund the takeovers. The shares issued as part of the capital raising were to be sold at a discounted price of $4.45 a pop.

This morning, the market finally got the chance to react to the news following the company's successful raising of $62 million from its current institutional investors as well as the $10 million placement.

Retail investors now have the chance to participate in the offer which gives them the right to buy two new shares for every 25 they currently own.

Foolish Takeaway

Freedom Foods shares have been discounted by the market to reflect the news of the acquisitions, but also the price dilution that takes place when new shares are offered. In my opinion, Freedom Foods shares could be a compelling long-term investment. However, shares do not come cheap at today's prices.

Motley Fool contributor Owen Raszkiewicz 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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