Pinned straw:
Like many retail investors, I am admittedly wired up to "dislike capital raises", almost by default. However, having experienced 4 capital placements in the last 2-ish months, I can sense my thinking and emotions gradually changing to not instinctively dislike, but to assess each raise on its own merits.
Being the cricket tragic that I am, to use cricketing analogies:
- ALC and WSP was not great - "fairly severe batting collapse after a good solid start by the openers, required run rate is accelerating to worrying levels"
- AD8 and now C79 - both feel like "a good understanding and use of the conditions, opening partnership is flourishing and platform is being set for a huge innings and subsequent win .."
The C79 Placement
- 11.4m shares at an offer price of $6.60, a 7.7% discount to the last closing price of $7.15 on Fri 3 Nov 2023 - I was expecting a $6.50 raise, at the time of writing, C79 is trading ~$6.70-ish, so pricing seems good
- New shares represent 11% of existing shares on issue and was not underwritten
- Placement raises C79’s funds available to $108m - $75m Placement + $33m Cash, excludes untapped debt facilities
Use of Funds
- Support the deployment of new PhotonAssayTM units - ~90%
- Development of (1) PhotonAssay Gen II (2) Application Development (3) Supply Chain resilience - ~10%
- Includes, subject to the provision of new debt, the potential expansion of manufacturing capacity beyond 18 units per year over the medium-term - this would result in a positive step up of earnings growth
- Strengthen the Company’s balance sheet, which in turn is expected to assist with its discussions with lenders, ensuring that it is best placed to optimise its capital structure moving forward.
- The Company is already in a position of generating positive operating cash flows from its existing 22 deployed units and therefore funds raised from the Placement can be applied primarily towards growth.
My Thoughts
- Clearly defined and focused use of funds for Deployment Growth and Development of Improvements - a good place to be as the units deployed moves closer to positive operating cash flow
- The recent Barrick & MSALABS partnership provided strong technology validation and appears to be a pivotal moment which will now drive momentum acceleration of deployment, manufacturing and further Gen II improvements - funding is now in place to drive that momentum via the placement, which will inevitably be followed up by increased debt facilities on more favourable terms
- No additional sales have been formally announced, but appears inevitable
- The placement reflects management’s long-term 360 degree thinking and business confidence
Things are coming together very nicely for C79 - sales conversion, deployment momentum, product improvements, improving of manufacturing capacity, supply chain resilience.
Discl: Held IRL
At least I saw this one coming. Wasn’t sure what the level of dilution or price was going to be, but it was clear to me that they were going to run out of money pretty soon which would then hamper their ability to grow given the capital intensive nature of the machines themselves.
A bit disappointing that CEO insinuated they would have no problem getting further debt funding on our recent call (at least that’s what I walked away with) so I was hoping they had managed to find a leveraged way to grow.
At least it’s now out of the way, we know what the scale is and we know the level of dilution. They have certainly had a good run up in share price recently so pretty good timing. @jcmleng did they also offer an SPP for existing shareholders or was it an institutional placement only?
DISC: held IRL and in Strawman.