The Pentanet Ltd (ASX: 5GG) share price is under pressure on Friday morning.
At the time of writing, the growth-focused telco's shares are down 4% to 73 cents.
Why is the Pentanet share price dropping today?
The weakness in the Pentanet share price on Friday comes after the company announced a successful capital raising.
According to the release, the company has received firm commitments to raise $20 million before costs via a share placement to institutional and sophisticated investors.
Pentanet is raising the funds at 72 cents per new share, which represents a 5.3% discount to its last close price.
Positively, demand was very strong for the placement. In fact, the company revealed that it received demand three times in excess of what it was seeking. Furthermore, there was a strong level of institutional participation that included many notable Australian funds.
Why is Pentanet raising funds?
The release explains that the funds will be primarily used to accelerate the disciplined execution of the company's Fixed Wireless and Cloud Gaming growth strategy. Central to this strategy is the deployment of Terragraph and GeForce NOW infrastructure to drive industry leading performance capability and to build a unique telecommunications and gaming platform in the Australian market.
Management notes that market interest in GeForce NOW Powered by Pentanet (the Australian deployment of NVIDIA's cloud gaming service) has exceeded initial expectations since its announcement in January.
As a result, Pentanet has significantly expanded the planned pilot infrastructure rollout and put in place an upgrade capability to accelerate the network deployment where market demand continues to support this.
Pentanet's Managing Director, Stephen Cornish, commented: "It is good to see the strong support from investors, highlighting an increased level of understanding around the relationship between cloud gaming and 5G, now enabling us to move Pentanet into the next stage of growth early. It is a fast-developing market and we have taken advantage of market opportunities in both our Fixed Wireless and our Cloud Gaming services to strengthen our capabilities."
"Our team will continue to show that we are leaders in these developing services, and the highest tier when it comes to providing subscribers with industry leading internet performance and delivering on what will be Australia's best and most anticipated high-quality Cloud Gaming service."
Despite today's weakness, the Pentanet share price is up a sizeable 25% since the start of the year.