You can’t just marry anybody - the weekly wrap

We are entering our 4th week (or so) of a quiet/consolidation period for Capital Raisings. We are chugging along at a pace of 4 to 6 share placements per day, with volumes reduced to perhaps 15 capital offerings per week. This change of tempo is fine and we are noticing investors’ appetite for more conservative companies as evidenced by the well-received Charter Hall Long Wale Reit (CLW) offer or company-specific growth strategy on display with the MyState Limited (MYS) capital raise. Finally, the medical technology and biotech sectors continue to attract interest because these companies’ futures are often determined by truly stock-specific events (i.e. FDA approval).

Structurally, we notice investors are supporting their favorite companies and adding to those positions when Capital Raises become available. Recent examples were the likes of Dacian Gold Limited (DCN) and uranium explorer Peninsula Energy (PEN). Both capital raises had significant support from their current shareholder bases. Share purchase plans are also showing as a featured mechanism for allowing existing investors access to transactions.

In summation, there is no one theme running through Capital Raises and it has become a market of Raises as opposed to a Raise Market.

Market Thematic of the Week 

The past few months have been marked with significant weakness of growth companies and the re-emergence of value stocks. Although major market indices are more or less unchanged, the underlying composition has dramatically changed.

There are, though, some signs of stabilisation. Bitcoin is volatile, but attempting to make a stand. Buy Now Pay Later shares have retraced in many cases ~50% and growth company charts are in the early phases of developing bases. Afterpay Limited (ASX: APT) is an example of this. Nobody knows the future but these big factor rotations are worth watching. Otherwise, buyers beware!

Yet, it feels that in the general small-cap and placement market, this week has brought about some renewed confidence. There were definitely more placements with much stronger bidding across the board. Most raises this week closed heavily oversubscribed. High volumes were traded across many sectors on the ASX, and it feels like we are back to a stronger market. 

Placements this week  

MyState Limited (ASX: MYS) announced an $80m capital raising. To rapidly accelerate the execution of MyState’s growth strategy, the company undertook a $20m fully underwritten institutional placement and a partially underwritten 1 for 6.6 pro-rata accelerated non-renounceable entitlement offer to raise approximately $60 million. The company’s 2021-2025 strategy has several objectives, which include the acceleration of their home loan and retail deposit growth over the medium term, improving operating leverage (cost to income ratio) in line with business growth, ROE accretion as capital is deployed, and to achieve sustainable growth in EPS over the medium term.

MyState Chairman, Miles Hampton commented, ‘’Since 2016, MyState has increased its home loan book by 43%. We now see an opportunity to build on that success and substantially increase our growth trajectory. This is important as it helps us to remain competitive and provide the services that our customers expect whilst improving shareholder value’’.

In what presents as a very unusual occurrence in the small-cap world, Volt Resources Limited (ASX: VRC) utilised a $8.5 million debt facility to fund its recent graphite edition. Just a few months ago, 180 Markets raised $3.65 million for Volt Resources Limited (ASX: VRC) at just 1.5c per share. Volt is one of the few companies listed on the ASX as a graphite producer.

MD Trevor Matthews expressed, “Volt is delighted to be partnering with JES Green Investments for the funding for the ZG business acquisition and working capital. We are already working on the draft loan agreement and security documents to quickly move to the drawdown of funds for the acquisition completion.’’ Today, Volt Resources Limited (ASX: VRC) opened trading at 3.8c.

Peninsula Energy Limited (ASX: PEN) raised $13 million through Canaccord Genuity and Shaw and Partners. The uranium sector has been strong recently and Peninsula Energy Limited (ASX: PEN) took advantage of a rising share price to raise funds at 15c per share. This represented only a small 7% discount to the 30-day VWAP. Funds used will include the purchase of 300k lbs of physical uranium.

Memphasys Limited (ASX: MEM) raised $3 million earlier this week. The company’s two largest shareholders Peter Investments Pty Ltd and Non-Executive Director Andrew Goodall contributed $1.65 million and $1.35 million respectively via the issue of Convertible Notes. Net proceeds will be used to enable to company to complete a verification and validation program for its upgraded Felix device, ahead of the re-commencement of commercial sales discussions in early access markets during the later stages of the quarter ending September 2021. The funding will also enable Memphasys Limited (ASX: MEM) to advance the additional products currently being developed in conjunction with the University of Newcastle. 

In just 1 hour, 180 markets were excited to have acted as lead managers raising $1.3 million for 3D Resources Limited (ASX: DDD). The funds raised will enable 3D Resources Limited (ASX: DDD) to extend the current estimated 200 metre RC drill program at its Challenger Gold project. The raise was extremely oversubscribed at an issue price of $0.005 per share. Every investor who partook in the raising will also receive one free option for every 2 shares subscribed listed under ASX: DDD0A.

THINKING ABOUT TAKING THE LEAP TO AN IPO? HERE'S WHAT WE KNOW

It was mixed week for IPOs. Pepper Money (ASX: PPM) was the headline IPO on the ASX this week. The company raised $450 million at an offer price of $2.89 per new share. Proceeds will be used to partially repay the Bridge facility, partially repay an existing Shareholder Loan, and strengthen Pepper Money’s balance sheet. However, the listing disappointed holders, opening at $2.61, which was 10% below issue price. This comes after a number of floats were pulled including Best and Less, Australian Venue Company and Aurora Healthcare. It seems that after the Nuix saga, investors are hesitant, instead seeking to wait for newly listed companies to report their annual results.

Ragnar Metals Limited (ASX: RAG) raised money at 2c per share with CPS Capital. The share price closed 45% up on listing day at what was a very strong vote of confidence for its highly prospective WA gold project. Investors will also receive 1 free attaching option exercisable at $0.04 two years from the date of issue.

Looking forward to next week, Keypath Education (ASX: KED) is set to list on Wednesday. Keypath Education (ASX: KED) is a leading education technology company that partners with universities globally, to deliver career-relevant education to individuals seeking to up-skill or re-skill to prepare them for their work future. Keypath is currently partnered with 31 universities, conducting 125 programs to over 30,000 students around the world. Gross proceeds will be used to support Keypath’s growth strategy, which includes increasing enrolments, improving retention in current programs, and expanding market share through broader portfolio of offerings.

Torque Metals (ASX: TOR) is seeking to list on Thursday. Euroz Hartleys led a $5 million raise at $0.20 per new share, where funds will be applied towards the evaluation and exploration of the company’s Paris Gold Project and Bullfinch Project.

Whilst Arcadia (ASX: AM7), which raised approximately $6 million at an issue price of $0.20 with CPS Capital, is hoping to list next Friday. The company has four exploration projects in Namibia.

180 Markets, for investors by investors 

Never miss an insight

Enjoy this wire? Hit the ‘like’ button to let us know. Stay up to date with my content by hitting the ‘follow’ button below and you’ll be notified every time I post a wire. Not already a Livewire member? Sign up today to get free access to investment ideas and strategies from Australia’s leading investors.