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Why LiveTiles Ltd (ASX:LVT) shares are in a trading halt

The LiveTiles Ltd (ASX: LVT) share price managed to sneak higher this morning before being placed into a trading halt shortly after the open.

The artificial intelligence-focused software company’s shares rose almost 5% to 75.5 cents before they were halted.

Why are LiveTiles’ shares in a trading halt?

This morning LiveTiles requested a trading halt while it finalised a $20 million institutional placement.

According to the release, the institutional placement aims to raise $20 million at $0.59 per share, a sizeable 22% discount to the last close price.

Management has advised that the proceeds will be used to invest in sales and marketing as the company continues to grow its global footprint. This includes the further development of the Microsoft channel, partner channel, and marketing.

Citi is acting as financial advisor to LiveTiles, with both the investment bank and Blue Ocean Equities acting as joint lead managers and bookrunners to the placement which is not underwritten.

LiveTiles’ CEO Karl Redenbach stated: “This capital raising will allow us to accelerate our investment in sales and marketing and allow us to continue building out our customer success teams to take full advantage of our strong sales pipeline and to drive customer and revenue growth. We have seen strong returns on our past investments in sales and marketing, with annualised subscription revenue growing by 275% in FY18 to $15.0 million.”

Its shares are expected to return to trade tomorrow morning after the successful completion of the placement.

What now?

I’m sure a lot of shareholders will have been surprised that this placement has been done today given the company finished the June quarter with a cash balance of $17.8 million.

They may also be disappointed at the dilutive effect that the raising has, but it is worth remembering that under a month ago its shares were trading around the 49 cents mark.

I think it is a good move by management to raise funds at 59 cents and all being well this will be enough to see it through to breakeven.

While it might be best to hold off an investment until the dust settles on this placement, I still think LiveTiles is one of the most exciting small cap tech shares on the Australian share market and well worth keeping a close eye on with the likes of Citadel Group Ltd (ASX: CGL) and Megaport Ltd (ASX: MP1).

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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 Citadel Group 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.

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