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Catapult Group International Ltd announces $25 million equity raising

The Catapult Group International Ltd (ASX: CAT) share price won’t be going anywhere today after the sports analytics and wearables company requested a trading halt.

Why are its shares in a trading halt?

Catapult requested the trading halt in order to undertake a fully underwritten institutional placement of shares to raise A$25 million at A$1.10 per share. This represents a 6.8% discount to the last traded price and is just 3 cents above its two and a half year low.

Unlike last year’s placement, when it raised $14 million at $2.00 per share, there will be no accompanying share purchase plan this time around.

According to the release, the net proceeds of the placement will be used to capitalise the business appropriately and enable the execution of its significant growth opportunities in the Elite and Prosumer markets. Management believes this will deliver long-term value for shareholders

Pleasingly, based on the company’s current strategy and supported by its three-year plan, management does not believe it will require any additional equity funding before becoming cash flow positive.

Another positive included in today’s announcement was management’s full-year guidance. It has reiterated its guidance of group revenue between A$76 million and $81 million and positive underlying EBITDA for FY 2018.

This is based on the assumption that the Elite Wearables subscription mix is slightly lower than the 66% previously advised, an AUD/USD exchange rate of 0.77, the prosumer launch occurring in the fourth-quarter, and its Elite Wearables and Elite Video businesses delivering significant positive underlying EBITDA after corporate costs.

Should you invest?

Whilst I am a big fan of Catapult and its technology, I’ve been a bit underwhelmed by its financial performance over the last couple of years. I’m not a buyer of its shares just yet, but I could be swayed if I can see signs that it is going to deliver on its three-year plan.

For now, however, I would sooner buy small cap tech shares such as ELMO Software Ltd (ASX: ELO) or Bravura Solutions Ltd (ASX: BVS) instead.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Catapult Group International Ltd and ELMOSFTWRE FPO. The Motley Fool Australia owns shares of Bravura Solutions Ltd. 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 Scott Phillips.