The worst performer on the S&P/ASX 200 Index (ASX: XJO) on Wednesday has been the IOOF Holdings Limited (ASX: IFL) share price by some distance.
In morning trade the financial services company’s shares have crashed 21% lower to $3.64.
Why is the IOOF share price crashing lower?
Investors have been selling IOOF’s shares on Wednesday after they returned from a trading halt following the completion of the institutional component of its capital raising.
According to the release, the fully underwritten institutional placement and the institutional component of its entitlement offer raised a total of approximately $734 million. This comprised $452 million from its placement and $282 million from its entitlement offer.
Management revealed that the placement attracted significant demand from new and existing institutional investors. It was a similar story for the entitlement offer, with a take-up rate by eligible institutional shareholders of over 92%.
These funds were raised at $3.50 per new share, which represents a discount of 24.4% to its last close price.
IOOF will now push ahead with its underwritten retail entitlement offer, which aims to raise a further $306 million, and its share purchase plan aiming to raise $50 million.
Why is IOOF raising funds?
IOOF launched its capital raising to partly fund the acquisition of the National Australia Bank Ltd (ASX: NAB) wealth business, MLC Wealth for $1,440 million. It also expects the funds to provide greater financial flexibly to continue to execute its growth strategy.
IOOF’s CEO, Renato Mota, was pleased with the success of its placement and entitlement offer.
He said: “We are encouraged by the strong vote of confidence from institutional investors as we take this once in a generation opportunity to create the leading wealth manager of the future.”
“We are also pleased that investors recognise that the strategic and value propositions are compelling. However, as CEO and as a company, we understand the obligations that attach to this. We will be entirely focused on delivering the promised better outcomes for all our stakeholders; our clients, members, advisers, the community and our shareholders,” he added.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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