The NIB Holdings Limited (ASX: NHF) share price has returned from its trading halt and sunk deep into the red.
In morning trade, the private health insurer's shares are down over 8% to $6.88.
Why is the NIB share price crashing?
The weakness in the NIB share price on Thursday has been driven by the completion of the company's $135 million institutional placement.
According to the release, following a bookbuild process, NIB was able to raise the funds at $6.90 per new share. This represents a discount of 8.1% to the NIB share price prior to the halt.
This was also the floor price for the underwritten placement, which may be an indication that demand wasn't overly strong for the offering.
NIB will now push ahead with its non-underwritten share purchase plan with the aim of raising a further $15 million. These funds will be raised at the lower of the institutional placement price or a 2% discount to the five-day volume weighted average price on 7 November.
Why is NIB raising funds?
The proceeds from the equity raising will be used to fund its entry into Australia's National Disability Insurance Scheme (NDIS) sector as a Plan Manager. NIB has identified a number of potential acquisitions and signed an agreement for one.
It will start with the acquisition of Maple Plan, which is the seventh largest Plan Manager with ~7,000 participants and revenue of approximately $10.4 million in FY 2022.
NIB's managing director, Mark Fitzgibbon, commented:
The NDIS has become a vitally important part of Australia's social capital and a significant economic sector. Already it supports 530,000 participants with more than 800,000 expected by 2030. NDIS funding is expected to double from around $29 billion in 2022, to $59 billion by 2030.
We believe we can contribute to the success of the NDIS and improve outcomes for participants. There is an alignment between supporting NDIS participants and our 70-year history as a private health insurer.
