How has the Carsales share price performed after past acquisitions?

Carsales shares are frozen right now amid acquisition moves.

Sebastian Bowen

Author Bio Sebastian Bowen has been a Motley Fool contributor since late 2018. Sebastian found his passion for writing and educating others about shares and all things finance after completing his studies in political, economic and social science and enjoys bringing this passion to life at the Fool. His investment philosophy is a simple one – buying high-quality companies at prices that make sense. When he’s not researching his next investment at all hours of the morning, Sebastian enjoys classic movies and likes to unwind with a good book, newspaper or record. Areas of Expertise Dividend investing ETFs Education Bachelor of Political, Economic, and Social Sciences (Government and International Relations), University of Sydney Social Media X/Twitter Favorite Investment Quote "In the short run, the market is a voting machine, but in the long run, it is a weighing machine." – Benjamin Graham

Published June 28, 2022 12:51 pm AEST

It's been a big week so far for the Carsales.com Ltd (ASX: CAR) share price. Not that you would know it from looking at Carsales shares this week. The ASX 200's online classifieds company's shares haven't moved an inch since last Friday when Carsales closed at $20.76 a share.

This is because the company requested a trading halt yesterday before market open. As we covered at the time, this was initially gazetted as a capital raising endeavour. We found out more soon after market open.

Carsales announced that it was intending to raise $1.207 billion from the placement of new Carsales shares. Eligible existing retail and institutional shareholders will be able to subscribe to one new Carsales share for every 4.16 shares owned for the price of $17.75.

The proceeds raised from this offer will fund the acquisition of the remaining 51% of Trader Interactive that Carsales does not yet own.

Trader Interactive is a US-based platform that is a market leader in recreational vehicles, powersports, commercial trucks, and equipment.

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How does the Carsales share price react to acquisitions?

We have yet to see how the Carsales share price will react to this latest news. The shares have not yet resumed trading, which won't happen until tomorrow.

Carsales bought its initial 49% stake in Trader Interactive back in May 2021. Back then, the company raised $600 million from a prior capital raising program. So let's look at what has happened to the Carsales share price when the company has made acquisitions in the past.

Carsales' last acquisition was that initial stake in Trader Interactive, announced on 12 May 2021. Investors initially reacted sceptically at the time, with the Carsales share price dipping from more than $19 on 11 May to $17.63 by 21 May.

On the day that Carsales returned from that trading halt (17 May 2021), its shares fell 7%. But a month later, the shares were back to around $19.50. By September 2021, they had risen to Carsales' 52-week high of $26.67 – a high watermark that still stands today.

So the last time Carsales halted its shares for an acquisition, it seemed to be 'dip, then pop'. There's no guarantee this will happen this time too, but it's an interesting case study.

Before this, Carsales' last major acquisition was the 2017 decision to buy the remaining 51% stake of South Korea's Encar.com for $244 million. Back then, the Carsales share price also reacted positively and gained around 11% in the month following the acquisition.

We shall have to wait and see what happens to the Carsales share price this time around when the company resumes trading tomorrow.

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