Damstra (ASX:DTC) share price halted amid $20m cap raise

The technology company’s shares are currently on ice.

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Shares in Damstra Holdings Ltd (ASX: DTC) were placed into a company requested trading halt before the open today. Prior to the request, Damstra shares were set to open the session at 40 cents apiece.

This comes after Damstra announced a $20 million capital raise to fund its future growth operations. Here are the details.

What did Damstra announce?

Damstra advised it had raised a total of $20 million before costs via a 2-tranche offer at 34 cents per share. The offer was made to sophisticated and institutional investors only.

Specifically, the funds were obtained via a fully underwritten institutional placement of new shares, raising $10 million, and a fully underwritten accelerated pro rata non-renounceable entitlement offer to obtain the other $10 million.

The offer represents a 15% discount to the last closing share price on 1 December 2021 of 40 cents per share and a 23.7% discount to the 5 day volume-weighed average price (VWAP) up until that point.

Damstra intends to use the funds for a range of growth initiatives in order to drive sales and support profit margins. For instance, it intends to allocate funds to grow sales capability and resources, especially in the North American market.

It also hopes to ensure availability of funds for the TIKS deferred consideration payment, secure further investment in Damstra’s Enterprise Protection Platform and bolster working capital requirements.

The trading halt is expected to end at market open on 6 December at which point eligible retail shareholders will have the opportunity to participate in a retail entitlement offer.

This particular offer is expected to run from 6 December and will close at the end of business on 16 December. Damstra says that eligible retail shareholders can choose to take up all, part, or none of their entitlements.

Furthermore, Damstra notes that this offer will include a “shortfall facility”, under which eligible retail shareholders may also apply for “top up shares” that weren’t nabbed up by other shareholders, “up to a maximum of 50% of the [shareholder’s] entitlement”.

The news follows an announcement from last week where the company announced that it had signed a variation to the Master Supply Agreement it holds with CPB Contractors Pty Ltd.

The impact of this update to the company’s turnover is expected to increase Annual Recurring Revenue (ARR) by $550,000, Damstra says.

Damstra share price snapshot

It’s been an unimpressive last 12 months for Damstra, with its share price losing almost 77% in that time. It’s arrived at this point after sliding a further 74% this year to date.

Even in the past month alone, Damstra has slipped more than 44% in the red and is also down 24.5% in the past week.

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The author has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Damstra Holdings Ltd. The Motley Fool Australia owns shares of and has recommended Damstra Holdings Ltd. 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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