The Magellan Financial Group Ltd (ASX: MFG) share price fell 5.75% to an intraday low of $9.52 on Friday after an investor update.
Magellan said the Share Purchase Plan (SPP) related to its merger with boutique investment bank Barrenjoey was "heavily oversubscribed" and it will issue new shares to the value of its original target of $20 million.
The SPP closed on Wednesday.
The SPP offered existing shareholders the opportunity to buy up to $30,000 worth of new Magellan shares at $8.45 apiece.
Earlier this month, Magellan completed a $130 million institutional capital raise to help fund the merger.
The Lowy family of the Westfield retail empire was among the participants, investing just over $79 million for a 5.1% stake.
Magellan management also offered a clarification today regarding the vesting of employee shares for Barrenjoey executives.
Under the terms of the Merger and pursuant to the Barrenjoey ESS plan rules, the Consideration Shares in respect of each employee will vest in seven equal instalments in six monthly intervals, commencing 8.5 years from the relevant employee's service commencement year and concluding after 11.5 years. Vesting is subject to continued employment.
As consideration for the merger, Magellan will issue 106,838,520 consideration shares to the shareholders of Barrenjoey upon completion.
Of those shares, 92,626,871 will go to Barrenjoey parties, and 14,211,649 will go to an affiliate of Barclays PLC.
All Barrenjoey parties will be subject to escrow or vesting arrangements, with staggered vesting and escrow release dates already set.
In an earlier statement, Magellan said:
These arrangements are designed to ensure continuity of leadership, and alignment with long-term shareholder outcomes with the Barrenjoey Parties to which the restrictions apply only permitted to sell their Consideration Shares after their respective dealing restriction period ends.
The weighted average dealing restricted period is approximately 5.5 years after announcement.
Magellan and Barclays provided seed capital for Barrenjoey when it launched in 2020.
Currently, Magellan owns a 36% stake and will pay $903 million via the issuance of new shares to buy the rest of the company.
Magellan said it would update the market again next Tuesday.
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Magellan share price snapshot
The Magellan share price has jumped 12.8% since the investment manager announced the proposed merger earlier last month.
The Magellan share price is now up 22% over the past year, but down 76% over the past five years.
This week, Macquarie downgraded Magellan shares to a sell rating with a 12-month price target of $8.55.
Earlier this month, after the merger was announced, Morgans upgraded Magellan to a buy and lifted its target from $9.80 to $12.43.
