The IOUpay Ltd (ASX: IOU) share price has found itself motionless again this morning. The company’s shares have been placed into a trading halt pending the release of an announcement and a capital raising.
Let’s take a closer look at the announcement and what this means for the IOUpay share price.
Trading halt again?
This trading halt is the second in as many days this week. Yesterday, IOUpay halted its shares less than an hour into trade following a meteoric share price rise. Shares in the Malaysia-based buy now, pay later (BNPL) provider flew from 44 cents to 82 cents on no news.
In response to the price query, the IOU Board indicated their belief that the dramatic price action was due to “price-factoring” of the major partnership for BNPL services announced on 9 February.
Following the response yesterday the trading halt was lifted. The shares traded hands once more. By the end of the day, IOU shares closed at 70 cents, down from the intraday peak of 82 cents.
Today’s halt, however, is not in relation to the share price. Rather, it appears the company being opportunistic and raising further capital while the shares are trading at these elevated prices.
IOUpay is cash hungry
For newer investors in IOUpay, it is worth knowing the company completed a capital raise of $10.5 million via a placement to investors on 9 November 2020. These funds were nominated to be used for salaries, professional services, product development, marketing, etc.
In the company’s December activity report the cash balance at the end of December was reported to be $8.54 million, with an operational cash outflow of $834,000. IOUpay relayed that its cash reserves and balance sheet were to be further strengthened by operating and financing activities in the following quarter. Well, it is the following quarter and today marks the financing activity.
Given the business is new in breaking into the BNPL market in Malaysia, receipts from customers are fairly low. Hence, IOUpay is reliant on capital raises currently to assist the company’s push into the market.
When will shares trade again?
IOUpay has requested the halt to remain in place until the earlier of trading on Thursday, or when the announcement is released to the market.
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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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