Up 102% in 2024, here's why this ASX All Ords stock is now frozen

Seize the day. This company is ready to cash in on its renewed image.

| More on:
A man sits in a chair hunched over a laptop and covered head to toe in frozen icicles to represent Envirosuite's trading halt

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The S&P/ASX All Ordinaries Index (ASX: XAO), aka the ASX All Ords, is on the ascent today. Heading into lunch, the popular Australian share market index is up 0.7% to 8,000 points. However, one company in its ranks is stuck at $2.08.

Electro Optic Systems Holdings Ltd (ASX: EOS) is stationary at the $2.08 price point today after requesting a trading halt.

Considering its track record so far this year, the uneventful trading session is almost out of character for this defence technology company. The Electro Optic Systems share price has darted 102% higher in less than four months — a return that would appease the most demanding investors.

Today, shares in this company have powered down. So what's the reason for this intermission?

This ASX All Ords share is tapping the market

What we know for sure is that EOS plans to launch a capital raise. According to the trading halt request, it will take shape as an institutional placement and a share purchase plan.

Those are the official details — straight from the horse's mouth.

Now for what is rumoured.

As reported by The Australian Financial Review (AFR), it is believed that this ASX All Ords stock is on the hunt for $40 million from investors. The AFR's sources say the proceeds will be used as working capital to 'fulfil customer orders'.

Over the past few years, EOS has used debt to help fund its operations. Last month two loans were still on its books: a $15 million working capital facility at 19% interest and a term loan facility of $35 million at an interest rate of 26%.

That is some costly capital. So it makes sense for the company to seek funds that don't come with the baggage of interest.

Why now?

Electro Optic Systems has pulled itself out of a massive hole. Now back to winning contracts and pumping out weapon systems, the ship appears to have escaped the choppiest waters.

Record full-year revenue of $219.3 million was reported last month, lifting 59%. The haemorrhaging losses were also patched, with losses reducing to $34.1 million from $53.6 million.

All these positives have fed into the EOS share price doubling this year. Investors are beginning to take down their guard on this formerly bloodied defence company.

The return of enthusiasm presents a prime opportunity to capture investors' appetite and put the company in better financial shape.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Electro Optic Systems. 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 Scott Phillips.

More on Capital Raising

A man slumps crankily over his morning coffee as it pours with rain outside.
Materials Shares

Why is this ASX 300 battery materials stock crashing 20% today?

Its shares are now down by 67% since this time last year.

Read more »

A man with a heavy facial hair growth and a comical look on his face holds his hands in a 'time out' gesture.
Energy Shares

Up 90% in a year, why is this ASX 300 uranium stock suddenly halted?

Here's why this high-flying stock is out of action today.

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Mergers & Acquisitions

Why are Metcash shares tumbling today?

This wholesaler has just received a $300 million cash injection.

Read more »

A man sitting at a computer is blown away by what he's seeing on the screen, hair and tie whooshing back as he screams argh in panic.
Materials Shares

Why is the Arafura share price sinking 17% today?

It has been a tough session for this rare earths stock. But why?

Read more »

Two happy pharmacists standing together in a pharmacy.
Capital Raising

Own Sigma shares? Everything you need to know about the 'transformational' $8.8b merger with Chemist Warehouse

Here's what you need to know about this mega merger.

Read more »

Close up of a sad young woman reading about declining share price on her phone.
Energy Shares

Why is the Boss Energy share price sinking 5% today?

This uranium share is raising funds. But why?

Read more »

a man in a suit holds up a hand and a stop sign at a roadblock positioned over a bitumen road .
Capital Raising

Why are Boss Energy shares in a trading halt?

This uranium share is raising funds. But why?

Read more »

A man sitting at a computer is blown away by what he's seeing on the screen, hair and tie whooshing back as he screams argh in panic.
Healthcare Shares

Why is the Mesoblast share price sinking 25% on Tuesday?

This biotech is being sold off today. But why?

Read more »