AfterPay Touch Group Ltd (ASX: APT) shares are locked in a trading halt this morning after the buy-now-pay-later group flagged that it wants to raise $300 million via the issue of new shares to institutional investors at a minimum underwritten price of $21.75 per share.
Retail shareholders will also be offered $30 million worth of new shares at either the lower end of the price paid by institutional investors or the 5-day volume weighted average price up until the share placement plan closes.
These shareholders will be eligible to apply for up to $15,000 worth of shares subject to a scale-back that is likely to be substantial or greater than 50% given the enthusiasm for the business and discount to the exchange traded price that could be a double-digit percentage.
Moreover, $30 million of new shares is not much for retail investors to fight over given a $5.8 billion market cap and a back of the envelope calculation shows that it would only take 2,000 retail shareholders ($30 million / $15,000) to apply for their full amount before a scale back took effect.
The maths are no secret and also likely to create a multiplier effect where a lot of retail investors apply for more shares than they actually want in the expectation of being scaled back and attempt to sell Afterpay shares on the exchange at a higher price than the placement price in order to fund the deal or simply make a small trading profit.
As such shareholders can expect the stock to remain volatile and potentially drift lower towards the final bookbuild price due to be struck later today.
Afterpay’s leaders Anthony Eisen, Nick Molnar and David Hancock are also to sell 2.05 million, 2.05 million and 0.4 million shares respectively to U.S. institutional investors at whatever the final placement price lands at.
After the raising Afterpay will have 5.8% more shares on issue which of course means all shares on issue will be worth a smaller slice of any future profits, but importantly it will have $330.8 million cash on hand to give it the balance sheet firepower and flexibility to invest heavily for the long term, rather than worry about turning short-term profits.
Afterpay joins a number of other popular companies to raise money on the ASX recently including WiseTech Global Ltd (ASX: WTC) Bravura Solutions Ltd (ASX: BVS), Audinate Ltd (ASX: AD8) and Volpara Health Technologies Ltd (ASX: VHT).
A little-known ASX company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.
And make no mistake – it is coming. To the tune of an estimated $US22 billion.
Cannabis legalisation is sweeping over North America, and full legalisation arrived in Canada in October 2018.
Here's the best part: we think there's one ASX stock that's uniquely positioned to profit immensely from this explosive new industry... taking savvy investors along for what could be one heck of a ride.
AND, this is the first time The Motley Fool Australia has EVER put a BUY recommendation on a marijuana stock.
Simply click below to learn more on how you can profit from the coming cannabis boom.
You can find Tom on Twitter @tommyr345
The Motley Fool Australia has recommended AUDINATEGL FPO, Bravura Solutions Ltd, and VOLPARA FPO NZ. 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.