EOS shares are sliding again. Here’s what investors are worried about

Electro Optic Systems Holdings Ltd (ASX: EOS) shares are struggling to find direction on Friday.

This comes after the defence technology company released the results of its Share Purchase Plan (SPP).

The EOS share price has moved between gains and losses early in morning trade. At the time of writing, it is down 2.85% to $9.20.

That extends a difficult week for the ASX defence share, which has fallen more than 14% over the past 5 trading days.

However, investors who bought a year ago are still sitting on an enormous win. EOS shares have climbed close to 300% since this time last year.

Let’s take a closer look at today’s announcement.

Shareholders wanted $95 million worth of stock

EOS confirmed that its SPP received applications worth approximately $95 million from 4,909 eligible shareholders.

That was well above the company’s original target of $25 million.

In response to the strong demand, the board increased the size of the offer to $40 million. EOS will now issue approximately 5 million new shares at $8 each.

The offer price was the same as the company’s recent institutional and strategic placements.

However, shareholders will not receive everything they applied for. EOS said applications would be scaled back on a pro-rata basis, taking into account each applicant’s shareholding at the record date.

Allocations will also be rounded so that eligible shareholders receive at least $1,000 worth of shares.

The new shares are expected to be issued next Tuesday, with trading due to begin the following day.

Why are EOS shares falling?

The SPP attracted almost four times its original target, showing there was no shortage of demand at $8 per share.

But the price is still well below where EOS shares are trading today. Even after this week’s fall, the stock remains 15% above the SPP issue price.

That may be encouraging some investors to take money off the table before the new shares begin trading next week.

There’s also the prospect of SPP participants locking in a quick gain once their shares are issued.

EOS has raised quite a large amount of capital in a short period. The SPP comes on top of a $150 million institutional placement and a $40 million strategic placement.

Has the EOS share price run too far?

EOS has enjoyed a huge rally as investors have backed growing defence spending and demand for counter-drone technology.

The company recently completed its acquisition of MARSS, adding AI-enabled command and control systems to its defence operations.

But after a gain of almost 300% in 12 months, expectations are much higher than they were a year ago.

The strong SPP demand is encouraging, but the extra shares and discounted issue price could keep the stock under pressure next week.

The post EOS shares are sliding again. Here’s what investors are worried about appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras 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 Electro Optic Systems. 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.