Why the Life360 (ASX:360) share price is sinking 9% today

LIfe360’s shares are deep in the red today…

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The Life360 Inc (ASX: 360) share price has returned from its trading halt and is tumbling lower.

In early trade, the mobile app maker’s shares were down as much as 9% to $12.33.

Why is the Life360 share price sinking on Thursday?

The catalyst for the weakness in the Life360 share price on Thursday has been the completion of the institutional component of its fully underwritten A$280 million capital raising.

According to the release, Life360 has raised A$88.7 million via its institutional entitlement offer and a further A$160.2 million through an institutional placement at $12.00 per new share. This represents an 11.1% discount to the Life360 share price prior to its trading halt.

Management advised that the capital raising received strong demand from both existing and new investors.

A fully underwritten retail entitlement offer, which will raise approximately A$31.1 million, will open on Tuesday 30 November.

Why is Life360 raising funds?

The proceeds from the capital raising will be used to acquire 100% of items tracking company Tile for a purchase price of up to US$170 million plus up to US$35 million in retention awards, representing a total consideration of up to US$205 million. This is the equivalent of approximately A$282.8 million.

Management notes that the combination of Life360 and Tile creates an integrated market leader in location solutions for all life stages. This enables a seamless experience for families that integrates people, pets and things.

It also highlights that Life360 will be the only vertically integrated, cross-platform solution of scale in the market and will be well-placed to take advantage of the growing location solutions category.

Life360’s Founder and CEO, Chris Hulls, commented: “We are delighted with the overwhelming institutional take up of our entitlement offer for the acquisition of Tile. We are grateful for the support of our existing shareholders, and pleased to welcome new shareholders to the register. Together they have demonstrated pleasing confidence in our vision of integrated location solutions for all life stages, enabling a seamless experience for families that integrates people, pets and things. We are excited to welcome the Tile team into the Life360 circle and look forward to working together to deliver our market leading solutions so that families can live fully.”

Are Life360’s shares in the buy zone?

The team at Morgan Stanley was pleased with the acquisition. In response, the broker retained its overweight rating and lifted its price target to $16.50.

Based on the current Life360 share price, this implies upside of ~33% over the next 12 months.

Should you invest $1,000 in Life360 right now?

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Life360, Inc. 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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