Why Nextdc Ltd shares are in a trading halt

Earlier today I suggested that investors consider buying Nextdc Ltd (ASX: NXT) shares due to the data centre operator’s huge growth potential.

Well, interested investors are going to have to wait a little bit longer to pick up shares because the company has requested a trading halt this morning.

According to the release, the trading halt has been requested due to the company launching a $281 million placement and uncapped share purchase plan (SPP).

The $281 million placement consists of a $131 million general placement and a $150 million cornerstone placement to UniSuper.

The placement has an underwritten floor price of $6.43 per share, which represents a 5.6% discount to the last close price. Though, UniSuper has agreed to take-up its side of the placement for approximately $6.59 per share.

The SPP will allow eligible shareholders to buy up to $15,000 worth of shares at the lower of the placement price or the price at the close of the SPP.

The equity raising is being conducted in order for NEXTDC to purchase three new commercial property sites for future data centre developments.

These new sites will be in Sydney, Melbourne, and Perth. If successful, this will mean NEXTDC has three sites each in Sydney and Melbourne, two sites in Perth, and two sites in Brisbane.

In addition to this, the company confirmed that it is on track to achieve its FY 2018 guidance of underlying EBITDA in the range of $58 million to $62 million and capital expenditure on existing facilities of between $220 million and $240 million.

Should you invest?

Management has advised that it has taken these steps because the company continues to experience very strong demand for its premium data centre services.

Furthermore, it confirmed that it is in advanced negotiations with several large customer opportunities, which it believes further improves visibility and increases its confidence in the size and nature of the long-term demand for its data centre services.

As such, it has made the strategic decision to prepare for future growth and to mitigate the risks of it running out of new capacity in key markets by purchasing the above sites.

I think this is a smart move by the company and believe it positions it perfectly to capture even more market share as it develops.

Because of this, I think NEXTDC remains one of the best tech investment options on the local share market alongside Altium Limited (ASX: ALU) and Xero Limited (ASX: XRO).

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Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia owns shares of Altium and Xero. 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.

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