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Afterpay share price lower after raising $650 million via institutional placement

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The Afterpay Ltd (ASX: APT) share price has returned from its trading halt and tumbled lower following the release of an update on its capital raising.

The payments company’s shares are currently down almost 3% to $66.15.

What did Afterpay announce?

This morning Afterpay announced the successful completion of the institutional component of its $800 million capital raising.

According to the release, Afterpay has successfully raised $650 million via a fully underwritten institutional placement. It was strongly supported by existing and new shareholders, leading to the placement price rising to $66.00 per new share.

This represents a discount of just 2.9% to its last close price and compares favourably to its underwritten floor price of $61.75 per new share.

Management advised that eligible shareholders, who bid for up to their pro-rata share of new shares under the placement, at the final price, were allocated their full bid on a best endeavours basis.

For the remaining shares under the placement, Afterpay sought to prioritise allocations to existing shareholders and then introduce new shareholders.

It advised that these allocations were based on factors including the likelihood of long term support, the strategic alignment of the investor, support to date, and the size and timeliness of bids into the book.

Why is Afterpay raising funds?

The company revealed that the proceeds will be used to accelerate its investment in growing underlying sales and prioritising global expansion to maximise shareholder value.

Afterpay independent director, Elana Rubin, commented: “The market has responded strongly to our aspiration to further accelerate our investment in growing underlying sales and expanding our global footprint, with the placement being oversubscribed.”

“We are very pleased with the support we have received from our existing shareholders and we welcome our new investors to the register. We look forward to our retail shareholders being able to participate in the SPP in the coming days,” she added.

Afterpay’s share purchase plan (SPP) will give eligible shareholders the opportunity to subscribe for up to $20,000 worth of shares.

These shares will be issued at the lower of the placement price of $66.00 and the 5-day volume weighted average price of its shares up to the SPP closing date.

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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 AFTERPAY T FPO. 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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