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Livetiles Ltd is looking to raise $20 million with an equity raising

Earlier today Livetiles Ltd (ASX: LVT) went into a trading halt pending the release of an announcement relating to a ‘material capital raising’. Livetiles said that the capital raising will involve a placement to sophisticated and professional investors.

This announcement comes only a few days after the ASX queried the company about its latest quarterly Appendix 4C. In the query letter the ASX noted that operating cash flow was negative for the quarter of $5.3 million, cash at the end of the quarter was $7.2 million and estimated cash outflows for the next quarter would be $6 million.

Livetiles responded by saying that the company is increasing revenue, has received a $2.1 million government grant in January 2018 and could undertake a capital raising. This could be a good time for the company to do that as the share price has grown from $0.20 to $0.48 over the past year.

According to AFR sources Livetiles is seeking to place an additional 44.4 million shares worth 9.8% of the company’s total shares on issue, at a price of $0.45 each. It’s also expected that a share purchase plan could be offered to existing investors for a further $3 million.

The funds raised would be used to ‘invest in growing sales, marketing and customer success teams. The bids had to be placed by close of trade today.

Foolish takeaway

Companies in the early stages of growth will often have to burn through cash to reach critical mass, but it’s usually better to be able to do it on their own terms, rather than having to raise cash a couple of months before running out. Hopefully this is the last time that Livetiles will have to raise cash.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has recommended LIVETILES FPO. 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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