Nearmap Ltd (ASX: NEA) is doing a capital raising for a total of $90 million to fund growth.
Nearmap is an aerial imaging business that operates in both the US and in Australia.
Nearmap’s capital raising
In April 2020 the company explained to investors that “cost management initiatives were being prudently deployed to preserve cash, maintain a strong balance sheet, and maximise flexibility for the future without the need for additional capital.”
However, today Nearmap has announced the launch of a capital raising for up to $90 million.
It comprises at least $70 million in an institutional placement and another $20 million in a non-underwritten share purchase plan (SPP).
Nearmap reminded investors that in the FY20 result it reported “strong growth momentum” with closing FY20 annual contract value (ACV) of $106.4 million and statutory revenue of $96.7 million.
The aerial imaging business said that it’s undertaking the capital raising to accelerate its growth opportunities.
There will be four areas that the money is deployed in:
Nearmap plans to achieve deeper penetration into strategic growth industry verticals through increased investment in sales and marketing, particularly in North America. It’s also expanding its product solutions to high value use cases, which will provide greater engagement and utility to customers.
The second focus is accelerating the roll-out of its HyperCamera 3 systems, which will generate expanded coverage with better images and enable expansion into new geographical markets.
The third focus is investing in the operational systems and data to support rapid scaling.
The final reason for the capital raising is that it will allow flexibility to pursue other growth initiatives and respond to opportunities while continuing to take a disciplined approach to cash management.
Raising details
The $70 million placement will represent 5.7% of the company’s existing shares.
Pricing will be determined through an institutional bookbuild with an underwritten floor price of $2.69 (a 6.9% discount to the last closing price). The bookbuild price cap is $2.77 with a maximum raising of $72.1 million.
Regular shareholders will be able to buy up to $30,000 of shares when the offer opens on 17 September 2020.
Director selldown
Non-executive director Ross Norgard is also going to sell 4.2 million shares, being around 15.1% of his holding. This will take his holding to below 5%. This director selldown is fully underwritten. He remains committed to the business.
Summary
Including the placement cash, Nearmap would have at least $105 million cash at 31 August 2020.
I can understand that Nearmap wants to aggressively pursue growth and it’s a good price to do it considering how strongly the price has recovered since the COVID-19 crash.
It was possible to buy Nearmap shares at a lower price in the first half of August, so it doesn’t strike me as an opportunistic time to take part in the raising – but a discount is attractive if you like Nearmap’s long term potential.
Nearmap isn’t on my watchlist, I prefer other ASX growth shares like Pushpay Holdings Ltd (ASX: PPH) which are also expanding overseas but don’t need to keep taking investors for money.
