Life360 share price lower despite takeover talks

The Life360 Inc (ASX: 360) share price has returned from its trading halt and dropped into the red.

In morning trade, the location technology company’s shares are down 5% to $6.40.

Why is the Life360 share price dropping?

The Life360 share price weakness today has been driven by the company’s surprise decision to undertake a capital raising this week.

With the company on course to generate positive operating cash flow this time next year, many thought that another capital raising wouldn’t be required.

However, management has decided to shore up its balance sheet given the uncertain macroeconomic environment.

According to the release, Life360 has raised $50 million (US$33 million) via a placement to institutional investors at $6.30 per new share. This was the maximum price of the bookbuild range of $6.20 to $6.30 per share and represents a 6.4% discount to the Life360 share price prior to the halt.

What did management say?

As mentioned above, management explained that the placement was undertaken to strengthen its balance sheet in uncertain times. It explained:

The Placement is a prudent capital management initiative that provides a strong cash buffer at a time of uncertainty across the global macroeconomic environment.

Potential takeover?

Something that appears to have slipped under the radar, judging by the Life360 share price performance, is the company’s comments regarding a potential merger transaction.

It explained that it has “received inbound interest from potential parties that could result in a merger with another entity.”

No details have been provided in respect to who these parties are. Furthermore, management has warned that discussions are preliminary and there is no certainty that they will lead to any transaction.

It also highlights that the company receives inbound interest from time to time and only considers options that it believes are likely to result in an increase in shareholder value.

The post Life360 share price lower despite takeover talks appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Life360, Inc. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Life360, Inc. 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 Scott Phillips.

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