Why is ASX tech share Bigtincan crashing 20% on Friday?

The Bigtincan Holdings Ltd (ASX: BTH) share price is ending the week deep in the red.

In afternoon trade, the sales enablement automation platform provider’s shares are down 20% to 57 cents.

Why is this tech share crashing?

Investors have been hitting the sell button today for a couple of reasons.

The first is that this morning the tech share revealed that it has completed a $30 million institutional placement at a 16.7% discount of 60 cents per new share. Bigtincan will also seek to raise a further $5 million from retail investors through a non-underwritten share purchase plan at the same price.

Management advised that the proceeds will be used to execute on identified strategic mergers and acquisitions, future inorganic and organic growth initiatives, and working capital and offer costs.

Takeover in danger of collapsing?

Bizarrely, this capital raising has come despite the company being the subject of a takeover approach from SQN Investors. Last week, SQN tabled an 80 cents cash per share offer, which is still under consideration.

As you might expect, SQN didn’t respond positively to the news of the capital raising and believes shareholders are being short-changed. This appears to have sparked fears that it could withdraw its offer if the capital raising goes ahead, which is weighing on the tech share today.

In an open letter, SQN commented:

BTH’s decision to pursue this would seem hasty and value-destructive following your receipt of our bona fide acquisition proposal that would offer the Company and its shareholders a significant all-cash premium. We strongly object to this proposed transaction and obviously will not participate in it if it materializes.

To be clear, the Company is on record with its CEO, David Keane, stating on July 27, 2022 that “the company is well funded with its cash balance. Given the cash flow discussion we’ve had today, the company is not looking to make any new capital raising activities, and there are no acquisitions currently planned.” This disclosure is one that we and likely other shareholders have relied upon when making investment decisions.

And then suddenly you would choose to embark on this potentially dilutive and speculative capital raise? We would urge you to instead honor your fiduciary obligations and engage with the various parties that have approached you about a control transaction, including SQN Investors.

The post Why is ASX tech share Bigtincan crashing 20% on Friday? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bigtincan. The Motley Fool Australia has positions in and has recommended Bigtincan. 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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