EROAD Limited

ASX:ERD

EROAD Limited

ASX:ERD
TradeAdd trade order Follow Unfollow Set Price Alert
$0.850 (+9.7%)
Last close price
#433
Rank
12
Held by
59
Followers
TradeAdd trade order Follow Unfollow Set Price Alert
Reports (7) My Report Forum Investors
Forum Topics ERD ERD ASX Announcements

Pinned straw:
actionman
Last edited 8 months ago

ASX-listed software business EROAD has entered a trading halt as the New Zealand-based company seeks to raise $NZ50 million ($46 miIlion). However, the company’s biggest shareholder warned it won’t participate in the offer.

Volaris, which owns almost 18 per cent of EROAD, questioned why the company needs additional capital and such a deep discount.

“We question the urgency, need and terms of this capital raise,” a Volaris spokesperson said.

“If the EROAD Board believes that our NBIO [non-binding indicative offer] proposal price of $1.30 per share materially undervalues EROAD’s business, how can they now issue additional shares at $0.70 per share?

“EROAD said the capital would be used to strengthen its balance sheet, repay debt and providing fund its growth strategy, especially in the key North American market.
thunderhead
8 months ago

On the face of it, raising at such a steep discount seems decidedly idiotic, unless this is some sort of poison pill to stave off the takeover. I don't really trust the judgement of this board given their recent history though.

15
UlladullaDave
8 months ago

Weird looking poison pill!

This is quite a farce. A board gets a NBIO over 100% the last traded price and doesn't even grant DD because it thinks it's too low but has the audacity to then do a cap raise at the pre-takeover price. Takes a fair bit of front to pull that off!

Be interesting to see where this trades when it comes back. Any instos in the placement are going to be pushing for the takeover I'd assume? Free money etc.

13
thunderhead
8 months ago

Yeah, the poison might just be strong enough to kill the patient along with the "disease" (t/o).

6
thunderhead
8 months ago

Sure enough, the price has been nuked after resuming trading.

10
actionman
8 months ago

The volume traded looks no bigger than some other days before the announcement. I’m not sure if that’s typical of a capital raising?

6
thunderhead
8 months ago

Volaris and other instos buying on the takeover may be holding and deciding what to do. It’s thinly traded anyway.

5
UlladullaDave
8 months ago

Wow. A 24% take up of the insto entitlement, even after they tried to shop it around on Friday. What does that say about expectations of a t/o from the existing insto shareholder base? Hmm...

17
loshell
8 months ago

Shenanigans afoot?

> EROAD said the capital would be used to strengthen its balance sheet, repay debt and providing fund its growth strategy, especially in the key North American market.

but they did not say "... by raising capital at a 1:2.06 share ratio with an offer in hand knowing Volaris would probably object and not want to participate because they wouldn't want to dilute their prospective acquisition in a way that wasn't under the control, this will dilute Volaris' ~18.7% holding down to ~12.6% and thereby erode voting clout + give the board some more wiggle room"

On the flip side, if the cap raise isn't well taken up by investors, that could act as a litmus test to convince the board Volaris' offer is not materially undervaluing the company and maybe the board will capitulate.

Seems like it might be time to fire up the popcorn maker as this looks like it could get more interesting!

13
actionman
8 months ago

Remember the founding CEO is back on deck as an "independent consultant" so they may have a viable plan to hold off the take over and reinvigorate the business to a higher value in a few years

10
thunderhead
8 months ago

Yep, I speculated as much in my response to the initial announcement of that appointment. But boy, if they are angling for that, they sure are doing it the hard way vending shares at such a steep discount. They need to do well enough for the market to 2x the value of the business just to get back on a level (and I will eat my proverbial hat if the market does not punish them for this move by marking down the shares heavily!).

10