Why the Straker (ASX:STG) share price is falling 6% today

The translation company’s shares are trending downwards today ahead of an impending share dilution.

| More on:
An investor with his head in his hands looking at falling asx share price on laptop

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Straker Translations Ltd (ASX: STG) share price is in the red today after the company released an update on its capital raising efforts.

At the time of writing, Straker shares are down 5.58% to $2.20.

What’s driving the Straker share price lower?

A possible catalyst for the decline is an impending share dilution for all existing shareholders.

According to this morning’s release, the translation specialist has completed a share placement and an upsized institutional entitlement offer. Both equity-raising efforts saw strong demand from existing shareholders and new investors.

As a result, the company increased the offer size of the placement by $5 million to $15 million. Together with the institutional entitlement offer of $5 million, this brings the total equity raised to $20 million.

Approximately 10.5 million new ordinary shares will be issued at a price of $1.90 apiece to each participating investor. This represents a discount of around 13.5% to today’s Straker share price.

Straker will use its existing placement capacity to create the new shares. Under listing rule 7.1, this allows up to 15% of its total shares to be issued without shareholder approval. The company will use an extension to the listing rule (7.1A) to issue the remaining shares with the additional 10% capacity.

The proceeds of the placement and institutional entitlement offer will see Straker improve balance sheet liquidity to execute its growth strategies. Funds will be allocated once the company pays down existing debt and covers the cost of the equity raise.

It is expected the placement and institutional entitlement offer shares will be allotted on 15 June 2021.

In addition, Straker will launch a $5 million retail entitlement offer on 9 June 2021. Eligible investors will be able to top up their holding with 1 share for every 10.32 Straker shares held.

Management commentary

Straker CEO Grant Straker said:

Having delivered strong growth since our IPO this was our first post-IPO equity raise and our stronger balance sheet will enable us to drive towards our aspirational goal of getting to $100m in revenue.

We have multiple growth opportunities in front of us, and we feel now is the time to invest in organic and inorganic growth strategies. It is very pleasing to see strong support for the equity raise and to have a world-class range of new and existing institutional shareholders on the register, a great reflection on all the hard work the Straker team has done over the past few years.

The Straker share price has almost doubled in value in the past 12 months, surging by more than 96%.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Straker Translations. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Capital Raising

A woman holds her hands to her face in shock and fear with a worried expression on her face as many ASX 200 shares hit 52-week lows today
Capital Raising

Why is the Bubs share price crashing 15% today?

The Bubs share price is crashing on Wednesday. What's happening?

Read more »

A person holds a stop sign in front of their head
Consumer Staples & Discretionary Shares

Why is the Bubs share price in a trading halt?

The Bubs share price has been halted. What's going on?

Read more »

A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash
Mergers & Acquisitions

Why is the Carsales share price crashing 15% lower today?

Carsales shares are sinking on Wednesday. Here's why...

Read more »

a small child and a pug dog sit in a go cart wearing old fashioned drivers headress and goggles as the drive along a country road with the boy holding his arm in the air and shouting as if celebrating their performance behind the wheel.
Capital Raising

How has the Carsales share price performed after past acquisitions?

Carsales shares are frozen right now amid acquisition moves.

Read more »

man bending over to look at red arrow crashing down through the ground
Capital Raising

BWX share price sinks 38% following capital raising at dizzying discount

BWX shares are feeling the wrath of investors after the steep discount offered by the company.

Read more »

a man peers out from a high collared jacket with just his eyes and nose visible amid a swirling snowstorm.
Capital Raising

Why is the Electro Optic Systems share price frozen today?

The space, defence, and communications company is undergoing a capital raise.

Read more »

A group of friends push their van up the road on an Australian road.
Capital Raising

Why is the Carsales share price frozen on Monday?

The market is unable to trade Carsales' stock on Monday. Here's why.

Read more »

A man sits in a chair hunched over a laptop and covered head to toe in frozen icicles to represent Envirosuite's trading halt
Capital Raising

The Wiluna Mining share price has been frozen for a month. What’s happening?

The ASX gold miner could remain halted for weeks to come.

Read more »