The Oceania Healthcare Ltd (ASX: OCA) share price is not having a great day today. Oceania shares are down 0.4% to $1.23 a share at the time of writing. Comparatively underperforming the S&P/ASX 200 Index (ASX: XJO), which is up 0.31% at the time of writing.
The current Oceania share price means that shares are now down 18% since 16 February. As well as 5.4% year to date.
Why might Oceania Healthcare shares be falling today?
Well, it’s been a dramatic week for this ASX healthcare share. On Tuesday morning, Oceania shares were placed in a trading halt at the request of the company. The catalyst for this halt was a proposed NZ$100 million capital raising program. As we reported at the time, Oceania was hoping to raise NZ$80 million via a fully underwritten placement from institutional investors. In addition to NZ$20 million through a non-underwritten retail offer. The possibility of an oversubscription being accepted.
The primary purpose of this capital raise was to fund an acquisition. Namely, the Waterford on Hobsonville Point retirement village in Auckland, New Zealand.
As such, Oceania shares were suspended from trading on Tuesday and returned to the markets yesterday. We also heard from the company yesterday about the success of its institutional placement. According to Oceania, the institutional placement was fully subscribed at a price of NZ$1.30 a share. According to the company, the offer was “strongly supported by existing institutional shareholders and also attracted significant bids from other institutional investors”.
Share purchase plan opens
But we also got an ASX announcement today outlining what the retail offer has in store for ordinary investors. The retail offer will be available for all existing shareholders as of 22 March. These shareholders will be entitled to apply for up to NZ$50,000 worth of new shares. The price will be the lower of either NZ$1.30 a share (or approximately $1.19 on current exchange rates), or “a 2.5% discount to the five-day volume-weighted average price of Oceania Healthcare Shares traded on NZX [the New Zealand Stock Exchange] during the five NZX trading days up to, and including, the Closing Day [12 April 2021]”.
Investors will receive any shares applied for on “on or about” Friday 16 April.
Thus, it’s understandable that the Oceania Healthcare share price is falling today. Why would existing investors buy shares on the ASX at today’s price of ~$1.23 when they can apply for more shares at roughly $1.19? This is the likely reason behind the Oceania Healthcare share price weakness today.
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Motley Fool contributor Sebastian Bowen 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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