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Is the InvoCare share price in the buy zone after its capital raising?

The InvoCare Limited (ASX: IVC) share price has returned from its trading halt and is pushing higher.

At the time of writing the funeral operator’s shares are up 1.5% to $11.45.

Why was the InvoCare share price in a trading halt?

InvoCare requested a trading halt on Tuesday while it undertook an underwritten institutional placement.

This morning the company revealed that it has successfully completed its placement and raised $200 million from institutional investors. This was through the placement of approximately 19.2 million new shares at a price of $10.40 per new share. The offer price represents a discount of 7.8% to its last close price.

Eagle-eyed readers might notice that this was more than the company was originally intending to raise.

According to the release, InvoCare received significant demand from investors for the placement. As a result, it decided to increase the size of the placement from a targeted $150 million to $200 million. This strong demand came from both existing shareholders and new investors.

These funds will be used to provide enhanced support for its growth initiatives and further strengthen its balance sheet during the COVID-19 pandemic.

InvoCare’s Chief Executive Officer, Martin Earp, was very pleased with the success of the placement.

Mr Earp said: “We are delighted with the demonstration of support shown by our shareholders and new investors in the Placement. With a strengthened balance sheet InvoCare is well positioned to weather the current market uncertainties while continuing to maintain momentum in its growth strategies to deliver long term value to its shareholders.”

What now?

InvoCare will now move onto its non-underwritten share purchase plan (SPP).

This will allow eligible shareholders to subscribe for up to $30,000 worth of InvoCare shares. The SPP is capped at $50 million in aggregate.

The new shares will be issued at the lower of the placement price of $10.40, a 2% discount to the 5-day volume weighted average price of InvoCare shares up to the SPP closing date, and a 2% discount to the volume weighted average price on the SPP close date.

However, if you’re not already a shareholder then you’ve missed out. To be eligible, you needed to be on the share registry at the close of play on Thursday April 9.

Should you invest?

Things are looking better for InvoCare now it has raised these funds and strengthened its balance sheet. But I wouldn’t be in a rush to invest just yet. I would suggest investors wait to see how long social distancing measures are in place and impacting the funerals industry before picking up shares.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended InvoCare 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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