The Challenger Ltd (ASX: CGF) share price is dropping lower on Friday following the release of an update on its share purchase plan.
At the time of writing the annuities company's shares are down almost 3% to $4.53.
What did Challenger announce?
This morning Challenger announced that its retail share purchase plan has now closed and has raised a total of $35 million.
This was more than the company was aiming to raise and was upsized from $30 million due to strong demand from retail shareholders.
Combined with its $270 million institutional placement, which completed in late June, Challenger has now raised a total of $305 million.
It could have raised even more from retail shareholders, but decided to scale back valid applications. The scale back was made on a pro-rata basis to eligible shareholders.
Nevertheless, all participating shareholders will receive an amount of shares that at least maintains the percentage holding after the equity raising that they held before, or their application amount if that was lower.
This excludes approximately 0.5% of participating shareholders that were restricted from applying for the amount that would maintain their percentage holding due to the $30,000 maximum application amount.
These shares will be issued at a price of $4.32 per new share, which represents a 2% discount to the five-day volume weighted average price of Challenger shares up to, and including, Tuesday 21 July 2020.
Why is Challenger raising funds?
Challenger's Managing Director and Chief Executive Officer, Richard Howes, was pleased with the response and explained how the funds will be utilised.
He commented: "We are very pleased with the strong response shown by shareholders, allowing us to increase the size of the SPP. Together with our recent successful institutional placement, the capital raised will enable our business to remain strongly capitalised through this period of ongoing market uncertainty and provide flexibility to take advantage of selective investment grade opportunities to enhance earnings."
Shareholders will no doubt be hoping that these funds do indeed enhance its earnings. The Challenger share price is well off its March lows, but still down by almost 50% from its February highs.
