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Why the Kogan share price jumped 11% to a record high today

man jumps up a chart, indicating share price going up on the ASX bank dividend
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The Ltd (ASX: KGN) share price has returned from its trading halt and zoomed higher.

At the time of writing the ecommerce company’s shares are up 11% to a record high of $13.77.

Why was the Kogan share price in a trading halt?

Kogan requested a trading halt on Wednesday in order to undertake a $115 million capital raising.

This capital raising comprises a $100 million fully underwritten placement at $11.45 per share and a non-underwritten share purchase plan to raise up to $15 million. The placement price represents a 7.5% discount to its last close price.

This morning Kogan revealed that its placement has completed successfully and was oversubscribed with strong investor demand from domestic and international institutions.

Kogan’s Chair, Greg Ridder, commented: “We would like to thank our existing shareholders for their strong support for this capital raising, and also recognise the overwhelming interest from new investors.”

“We recognise the significant trust placed in our management team to deliver a strong return on your capital, and we have every confidence the team will rise to the challenge. To all our shareholders, your company has gone from strength to strength since listing and, with the capital we have raised this week, your company is now stronger than ever,” he added.

Why is Kogan raising capital?

Kogan chose to raise capital in order to provide it with the financial flexibility to act quickly on future value accretive opportunities.

These opportunities are ones that it feels broaden its offering, expand its customer base, or enhance its operating model. Much like its acquisition of replica furniture and homewares retailer Matt Blatt for $4.4 million last month.

While the company has not revealed what it has its eyes on, management notes that multiple opportunities are presenting themselves already.

And judging by its share price reaction today, investors appear confident that Kogan will spend these funds wisely and drive further strong growth in the coming years.

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Returns as of 6th October 2020

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended ltd. 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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