Why the Irongate (ASX:IAP) share price is edging lower today

The Irongrate share price has started the week in negative territory…

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The Irongate Group (ASX: IAP) share price is backtracking in mid-afternoon trade. This comes after the diversified real estate investment trust provided an update on its recent equity raise.

At the time of writing, Irongate shares are swapping hands for $1.51, down 1.31%

Irongate completes placement

One catalyst for today’s fall in the Irongate share price could be investor concerns over an impending share dilution.

According to its release, Irongate announced it has completed a fully underwritten institutional placement to raise $50 million before costs. The company received overwhelming support from a number of institutional investors.

The offer will see approximately 34 million ordinary staples securities, at a price of $1.47 apiece, allocated to participating investors. This represents a 4% discount on the issued securities prior to when the company went into a trading halt on Tuesday morning.

Irongate will use its existing placement capacity to create the new shares. Under listing rule 7.1, this allows up to an additional 15% of its total shares to be issued without shareholder approval.

The company will use the proceeds from the capital raise to partly fund the acquisition of a Sydney-based property. Irongate is seeking to purchase a 100% interest in 38 Sydney Avenue, Canberra for a total of $73.75 million. This implies a current yield of 5.13% for the property.

The new securities are expected to settle this Friday 18 June, with allotment on the ASX on 21 June 2021.

Irongate CEO, Graeme Katz touched on the company’s latest capital raising efforts, saying:

We are very pleased with the strong support we have received from investors and are looking forward to delivering on our strategy of growing IAP’s asset base by investing in good-quality income-producing properties.

About the Irongate share price

Despite today’s falls, Irongate shares have gained around 25% in the past 12 months. The company’s share price is nearing its 52-week high of $1.585 reached in mid-May.

Based on valuation grounds, Irongate commands a market capitalisation of around $907 million, with over 611 million shares outstanding.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. 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 no position in any of the stocks mentioned. 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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