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Why the Superloop share price is in a trading halt

The market may be charging higher again on Monday but the Superloop Ltd (ASX: SLC) share price won’t be joining in on the action after being placed in a trading halt this morning.

Why is the Superloop share price in a trading halt?

This morning the provider of connectivity services requested a trading halt whilst it undertakes a proposed capital raising involving institutional and retail components.

No further details were provided with the release, however the AFR has reported that Superloop is interested in raising around $80 million to $100 million.

The proceeds are expected to be used to strengthen the company’s balance sheet and allow management to execute its business plan. As of its last update Superloop had a net debt of $70.3 million and senior bank facilities of $120 million.

Whilst strengthening its balance sheet would be a positive for Superloop, it looks likely to come at a cost for shareholders. Sources told the media outlet that the funds are expected to be raised at 75 cents per share, which is a discount of approximately 26% to its last close price of $1.01.

This is the second time this year that Superloop has launched a capital raising. In February the company raised $30.87 million through an institutional placement and retail entitlement offer. These funds were raised at $1.25 per share.

Since then the company has been subjected to a $1.90 per share takeover proposal from QIC Private Capital, which ultimately fell through following a period of due diligence. Perhaps QIC realised that it was going to take a significant investment to get Superloop to where it needs to be.

Should you invest?

When the dust settles on this capital raising it might be worth looking at Superloop to see if there’s an investment opportunity.

But for now, I would sooner buy NEXTDC Ltd (ASX: NXT) or Telstra Corporation Ltd (ASX: TLS) for exposure to the telco industry.

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James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of SUPERLOOP FPO. The Motley Fool Australia owns shares of and has recommended Telstra Limited. 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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