The Serko Ltd (ASX: SKO) share price won’t be going anywhere on Thursday after the travel and expense technology solution provider requested a trading halt.
Why is the Serko share price in a trading halt?
Serko requested the trading halt whilst it undertakes an equity raising of up to NZ$55 million to accelerate and execute on the opportunities arising from a changing business travel market.
This equity raising comprises a NZ$45 million fully underwritten placement and a NZ$10 million non-underwritten share purchase plan.
The placement is underwritten at a floor price of NZ$4.35 per share, which represents a 3.5% discount to its last close price of NZ$4.51 per share and a discount of 4.6% to the 5-day volume weighted average price of NZ$4.56.
Serko’s CEO, Darrin Grafton, commented: “The COVID-19 pandemic is creating opportunities for us to accelerate the development and rollout of our technology to support our Travel Management Company (TMC) and reseller partners.”
“In recent months, we have received inbound demand from these organisations as they consider, plan and request accelerated timetables to onboard new customers, deliver new features and expand existing partnerships. This demand has exceeded our expectations and is highlighting increased opportunities from a changing travel industry,” he added.
Mr Grafton also explained why the company is raising funds at this point despite having NZ$33.6 million of cash on its balance sheet.
Noting that the timing of meaningful revenue generation is uncertain, he said: “Serko’s priority is to ensure it has the resource and capacity to execute on its strategic priorities, positioning the company for growth when business travel normalises and to capitalise on opportunities arising from changes to the travel industry.”
How will the money be spent?
The proceeds of the equity raising will be used to accelerate the development of its globally scalable, localised travel platform, allowing Serko to be well positioned for recovery as business travel increases. It is also progressively scaling-up to bring the power of Zeno to the global market.
Funds will also be used to support increased demand for customer and reseller onboarding to drive volume across all markets. This is particularly the case in Europe and North America.
In addition to this, it plans to expand the breadth and depth of content channels across all markets, responding to new and changing business traveller needs.
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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Serko Ltd. The Motley Fool Australia has recommended Serko 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.