The Buddy Technologies Ltd (ASX: BUD) share price has returned from an almost three-month suspension on Friday and crashed lower.
In morning trade, the smart device company's shares are down a massive 46% to 2.3 cents.
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Why is the Buddy Technologies share price crashing lower?
Investors have been selling down the Buddy Technologies share price on Friday after it announced an equity raising, debt restructure, and trading update. And as you might have guessed from the share price reaction, it wasn't pretty.
According to the release, the company has successfully completed a bookbuild and received firm commitments for a placement to institutional, professional and sophisticated investors to raise $6.5 million before costs. These funds are to be raised at 2.5 cents per new share, representing a huge 41.9% discount to its last close price.
The company will also undertake a pro rata non-renounceable entitlement offer to existing shareholders to raise an additional $10 million before costs. Buddy Technologies is aiming to raise these funds at the same price. Though, with the Buddy Technologies share price trading below the offer price at 2.3 cents, it may not have too many takers. Particularly given its abject performance this year and uncertain outlook.
Debt restructure
The company has also entered into formal binding arrangements with Eastfield to settle all amounts owing in respect to a line of credit facility and historical accounts payables which totalled ~US$5.6 million. This will be through the payment of US$2.75 million to Eastfield and debt forgiveness of US$3 million.
In addition, Buddy Technologies has restructured its existing US$10 million term debt facility with PFG. This includes through the issue of almost 24 million shares at an issue price of 2.5 cents per share, further diluting shareholders. Buddy has also agreed to make a pre-payment of US$2.5 million of amounts owing to PFG under the PFG Loan Facility, which will reduce the company's monthly principal payments.
Operational update
Buddy Technologies continues to struggle due to the semiconductor shortage. However, one positive is that Nanchang Innotech Homesmart has commenced production of LIFX Switches, with the first smart lights to be manufactured in September 2021 in time to contribute to 2021 holiday season supply.
It also notes that it has been receiving approximately weekly shipments of inventory to warehouses in respect to manufacturing orders placed at end of 2020/early 2021. Given the parts shortages, it expects the last of this inventory to be delivered by the end of August 2021.
