The Service Stream Limited (ASX: SSM) share price has come out of a trading halt today following a successful placement and institutional entitlement offer.
During afternoon trade, the essential network services provider’s shares are down 4.17% to 92 cents.
What’s driving the Service Stream share price lower?
A catalyst for today’s fall in Service Stream shares is that investors may be concerned about an impending share dilution.
According to its release, Service Stream advised that it has successfully received commitments to raise roughly $130 million (before costs). The placement gathered support from institutional and sophisticated investors from Australia and overseas.
Approximately 144 million new ordinary Service Stream shares will be issued at a price of 90 cents apiece to successful applicants. Those funds are expected to settle on Friday 30 July 2021.
In addition, the company is conducting a retail entitlement offer to raise a further $55 million. This component will be opened up to everyday investors next week on Tuesday 27 July 2021.
Under the retail offer, eligible shareholders can apply for 1 Service Stream share for every 3 Service Stream shares owned. A top-up facility will also be available for investors who take up their full entitlement, up to a maximum of 100% in excess.
The proceeds from the equity raising will be used to partly fund the acquisition of Lendlease Services. The enterprise value has been agreed for a price of $310 million, less adjustments for debt and debt-like items.
While this represents a shortfall, Service Stream will fund the remaining amount through its expanded debt facilities and available cash.
Service Stream share price summary
It’s been a tough ride for Service Stream shareholders, with the company’s shares falling by almost 50% year to date. Looking at a longer time frame, the Service Steam share price is down also 50% since this time last year.
Based on today’s price, Service Stream presides a market capitalisation of around $378.5 million, with roughly 410 million shares outstanding.
The post Why the Service Stream (ASX:SSM) share price is heading south today appeared first on The Motley Fool Australia.
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More reading
- Here’s why the Service Stream (ASX:SSM) share price is halted
- ASX 200 midday update: Kogan FY 2021 update, Altium sinks
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 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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