Spacetalk (ASX:SPA) share price surges 77% on Telstra deal

The Spacetalk Ltd (ASX: SPA) share price is in the stratosphere today after the company announced a major deal with Telstra Ltd (ASX:TLS).

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The Spacetalk Ltd (ASX: SPA) share price is in the stratosphere today. At the time of writing, shares in the technology company are swapping hands for 19.5 cents each. That’s more than 77% higher than their last closing price of 11 cents before they entered a trading halt earlier this week.

For comparison, the All Ordinaries Index (ASX: XAO) is currently down 0.56%.

The monumental rise comes after investors reacted positively to news of a commercial deal with Telstra Corporation Ltd (ASX: TLS) and a $5 million loan facility from PURE Asset Management Pty Ltd.

Let’s take a closer look at what the company announced today.

Spacetalk share price explodes on Telstra deal

The Spacetalk share price on an absolute tear today. In a statement to the ASX, Spacetalk declared Telstra had agreed to sell its Adventurer devices in all retail stores, and online, by April 2021.

The device will be placed in Telstra’s core wearables range after it is configured for the Telstra network.

According to Spacetalk, Telstra plans to aggressively market the devices. It intends to use influencer channels, digital advertising, in-person pitching, and billboard placement within stores.

Telstra will sell the technology outright or through payment plans. It also plans to roll out an Adventurer-specific SIM service plan in the near future.

Speaking on the news, Spacetalk CEO Mark Fortunatow said:

We are delighted by the ranging of Spacetalk Adventurer with Telstra, Australia’s leading telecommunications and technology company.

This is a very strong endorsement of the quality of Spacetalk devices, with Adventurer to be placed on Telstra’s core wearable device range. It is also a recognition by Telstra of the growing market and customer need for Spacetalk devices, and our leadership in the category of kids connected smartwatches. Needless to say, we are extremely excited by the enhanced brand recognition and sales growth we expect from extending our customer reach with Australia’s largest MNO [mobile network operator].

Telstra retail and regional executive Fiona Hayes also said:

Smartwatches are the fastest growing market for wearables globally and the addition of Spacetalk will strengthen Telstra’s connected smartwatches offering. Spacetalk is a market leader in Australia in connected smartwatches for children and seniors, providing a practical solution for families to stay connected.

The loan facility

In a second announcement, Spacetalk also told the market it has secured a $5 million loan from PURE Asset Management. The credit will be available for immediate use.

The loan is split into two components:

  1. A $3 million term loan facility at 9.5% interest with an option obligating Spacetalk to issue 11 million shares to PURE at a value of 30 cents each.
  2. A $2 million bridging facility at 12.5% interest.

The term loan will span four years while the bridging facility will last two years. The company will use the credit to purchase inventory, invest in its brand, and for a range of other purposes.

Spacetalk and Telstra share price snapshots

Over the last 12-months, the Spacetalk share price has increased by around 117%. Most of these gains, however, occurred today. One year ago, the company’s share price was 9 cents. On Tuesday this week, it closed at 11 cents.

The Telstra share price is currently up a much more modest 0.47% today. At the time of writing, shares in the telecom giant were selling for $3.205. Compared to this time last year, Telstra shares have remained relatively flat – losing around 2% of their value. The Telstra share price has, however, gained around 19% since reaching its 52-week low in October last year.

Spacetalk and Telstra have current market capitalisations of $30.6 million and $37.8 billion respectively.

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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