Software logistics business WiseTech Global Ltd (ASX: WTC) this morning revealed that it has raised an additional $35.9 million in cash from retail or 'mum and dad' investors at $20.90 per share.
The group even expanded the share purchase offer above the initial $30 million amount so it could fill in full every subscription applied for rather than scaling back the amount apropos of its ballooning share count.
This strategy makes sense if you're a cash hungry business employing an aggressive acquisition policy in order to build market dominance in the software-as-a-service for global logistics space.
By comparison one of WiseTech's hot ASX tech rivals in Appen Ltd (ASX: APX) also recently completed a share purchase plan worth $15 million to retail investors, but scaled it back to just 29% of the shares applied for in effectively flagging it didn't want to issue any more shares than it considered necessary to fund an acquisition and manage the balance sheet.
WiseTech's retail raising follows on from a $300 million institutional capital raising at $20.90 per share and the cash grab at a sky-high valuation makes sense if you're sitting in the C-suite.
The kicker for shareholders is that it won't be for at least 12 -24 months until we see the results of its aggressive acquisition strategy flow through to its financials in terms of margins and earnings per share growth for example.
It will also only be in 6-24 months that we have a rough idea of whether or not, inter alia, WiseTech has paid a fair price for the large number of acquisitions it has completed in the last 2 years.
As a a tech investor the key for me is to find companies generating strong organic growth, which both WiseTech and Appen are doing, but it must be noted both they've also pivoted to an acquisitive strategy that I'm not so keen on as it is already hurting margins in the case of WiseTech.
As such I'm not a buyer of WiseTech shares on valuations grounds and until I see the results of its strategy laid out in its financials.
