SelfWealth (ASX:SWF) share price sinks 9% on capital raising efforts

Investors are splitting hairs after SelfWealth shares are recording heavy falls.

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The SelfWealth Ltd (ASX: SWF) share price is having a woeful day upon its return on the ASX today. This comes after the online brokerage company announced an update to its capital raising efforts.

At the time of writing, SelfWealth shares are down a sizeable 8.84% to 39 cents. Interestingly, the All Ordinaries Index (ASX: XAO) was up 0.2% to 7,630 points earlier in the day, before currently falling to 0.97%.

What’s dragging SelfWealth shares lower?

Investors are scrambling to sell SelfWealth shares as the company prepares to dilute existing shareholder value.

According to its release, SelfWealth advised it has received strong support to raise $10 million through a share placement. The offer was presented to both new and existing investors at an issue price of 39 cents per share. This equates to roughly 25.6 million new ordinary shares being added to the company’s registry.

Unsurprisingly, the current SelfWealth share price is now at the same price as offered by the company on 14 July. However, today the company’s shares dipped as low as 37.5 cents, 4% below the issue price of the placement.

SelfWealth 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 an extension to the listing rule (7.1A) to issue the remaining shares (20.2 million).

The funds will be used to accelerate SelfWealth’s growth strategy in delivering diversified revenue streams and increasing market share. This includes expanding product offerings as well as investing in user experience and high-demand features. Furthermore, the company is seeking to implement a robust data and analytics strategy, and increasing headcount to support mobilisation.

SelfWealth also intends to utilise existing cash reserves of around $3 million to pursue its planned growth initiatives.

In addition to the placement, the company will offer a Share Purchase Plan (SPP) to raise an additional $2 million. The SPP will be offered to retail investors at the same price as the placement. The closing date of the SPP is on 6 August 2021.

Management commentary

SelfWealth CEO Cath Whitaker commented on the placement, saying:

We successfully completed the $10 million equity raise with the transaction oversubscribed. We are pleased with the level of engagement from our existing shareholder base along with welcoming new high-quality investors onto the register.

We are excited to be entering this new stage of growth, with the proceeds from the Placement allowing us to accelerate our strategy and continue to improve on the user experience for our members, delivering value and fairness to Australian investors

The SelfWealth share price has fallen more than 26% over the past 12 months and is down roughly 29% year-to-date.

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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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