The ELMO Software Ltd (ASX: ELO) share price will be on watch today after the cloud-based HR and payroll software provider announced the launch of a fully underwritten $55 million placement and a $5 million share purchase plan after the market close on Wednesday.
According to the release, ELMO is raising the funds at an offer price of $6.00 per share, which equates to an 8% discount to the last close price and a 10.5% discount to the five-day volume weighted average price.
ELMO advised that it intends to use the proceeds from the placement and share purchase plan to invest in sales and marketing, research and development, and client services to take advantage of the large market opportunity and expansion in its addressable market.
In addition, the company remains committed to continuing to execute strategic acquisition opportunities to either expand the product offering or to acquire customer lists that provide module cross-sell opportunities.
ELMO co-founder and CEO, Danny Lessem, said, "ELMO is experiencing an exciting stage of growth. We have filled key product gaps over the last couple of years, to deliver Australia's most comprehensive HR, payroll and rostering / time & attendance platform."
"In doing so, we have increased our market opportunity by adding valuable new revenue opportunities from a broadened product set and a new market segment. Our strong FY19 results reflect the success of our strategy. In addition, there are significant opportunities for ELMO to accelerate its strong organic growth with targeted strategic acquisitions. With a large market opportunity and a comprehensive product suite, we are focussed on delivering long term sustainable growth," he added.
Share purchase plan.
The share purchase plan will provide each eligible shareholder with the opportunity to apply for up to $30,000 worth of new shares at the lower of the issue price under the placement and the price that is a 2% discount to the VWAP of ELMO shares on the ASX over the five trading days up to, and including, the closing date of the share purchase plan offer.
Management advised that the offer will raise a maximum of $5 million and it may undertake a scale back of applications that exceed that amount.
Secondary sell-down.
Concurrent with the placement, the company's founders and largest pre-IPO seed capital investor have agreed to sell 3.3 million shares to investors worth approximately $20 million to increase the free-float and liquidity.
JLAB, Garber Trust, and Lessem Trading have agreed to sell approximately 1.3 million, 1.3 million, and 0.7 million shares respectively. This represents approximately 5.3% of current total shares outstanding in ELMO.
However, the three parties still have significant interests of approximately 14.7 million, 10.7 million and 11.3 million shares, respectively. This represents ~50.6% of its issued shares. Furthermore, each has confirmed that they will not sell any further ELMO shares for at least 120 days.
