At lunch on Friday, the S&P/ASX 200 Index (ASX: XJO) is on course to end the week on a positive note. The benchmark index is currently up 0.55% to 7,335.6 points.

Here’s what is happening on the ASX 200 today:

Corporate Travel Management shares to return

The Corporate Travel Management Ltd (ASX: CTD) share price is falling on Friday after raising $75 million through an institutional placement. These funds were raised at a 5.8% discount of $21.00 per new share. Combined with an upcoming $25 million share purchase plan, the proceeds will support the acquisition of the Australia and New Zealand corporate and entertainment travel businesses of Helloworld Travel Limited (ASX: HLO).

Healius and Sonic announce acquisition

Pathology companies Healius Ltd (ASX: HLS) and Sonic Healthcare Limited (ASX: SHL) have both announced acquisitions this morning. Healius is acquiring leading bioanalytical laboratory company Agilex for an enterprise value of $301.3 million. Whereas Sonic has announced the acquisition of US-based medically led anatomical pathology company, ProPath for an undisclosed fee. The deal will be funded from cash and available debt lines and be immediately earnings per share accretive.

BNPL shares sold off

It has been a very bad day for buy now pay later (BNPL) shares such as Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P). This follows news that US authorities have launched an investigation into the BNPL sector. The US Consumer Financial Protection Bureau is looking to see if BNPL players need to be better regulated and if US consumers are adequately protected.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Friday is the St Barbara Ltd (ASX: SBM) share price with a gain of 6%. This follows a rise in the gold price overnight. The worst performer has been the Afterpay share price with a 7% decline following news of the US investigation into the BNPL sector.

The post ASX 200 (ASX:XJO) midday update: BNPL shares sold off, Corporate Travel returns appeared first on The Motley Fool Australia.

More reading

• Zip (ASX:Z1P) share price dives 8% amid US concerns and Sezzle merger rumbles
• Sonic Healthcare (ASX:SHL) share price struggles despite US acquisition
• ASX BNPL shares tumble today amid US probe
• Corporate Travel Management (ASX:CTD) share price drops after raising $75m
• Healius (ASX:HLS) share price falls despite $300m acquisition

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. owns and has recommended AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended AFTERPAY T FPO. The Motley Fool Australia has recommended Corporate Travel Management Limited and Sonic Healthcare Limited. 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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The Zip Co Ltd (ASX: Z1P) share price is tumbling as the United States puts pressure on buy now, pay later (BNPL) providers. Additionally, reports that talks of a merger with Sezzle Inc (ASX: SZL) hit the rocks are swirling on Friday.

At the time of writing, the Zip share price is trading at $4.11, 7.64% lower than its previous close.

Let’s take a look at all that might be weighing on the BNPL giant’s shares today.

Zip share price tumbles amid heat from Washington

The Zip share price is having a rough day amid the launch of an inquiry by the United States Consumer Financial Protection Bureau (CFPB).

The body has issued orders to 5 major BNPL companies – Zip, Afterpay Ltd (ASX: APT), Klarna, Paypal Holdings Inc (NASDAQ: PYPL), and Affirm Holdings Inc (NASDAQ: AFRM) – to collect information on the risks and benefits of their offerings.

CFPB is worried about increasing debt, regulatory arbitrage, and data harvesting in the technologically advancing market.

It notes people can enter BNPL loans with multiple providers, leaving them vulnerable to financial hardship.

The body’s concerns mirror those of Financial Counselling Australia. It recently found the number of people approaching Australian financial counselling services with BNPL debt increased more than 50% over the last 12 months.

Additionally, CFPB believes some BNPL providers might be improperly evaluating which consumer protection laws apply to their services.

Finally, it’s concerned by BNPL providers’ ability to retain data on customers’ payment histories. It noted some companies have used this data to create “closed-loop shopping apps” with partner retailers.

CFPB states it working with international partners – some of which are in Australia – to conduct the inquiry.  

Rumoured Sezzle merger reportedly in the bin

Potentially also weighing on the Zip share price today are reports it has both entered and exited merger talks with fellow ASX-listed BNPL provider, Sezzle.

According to The Australian, the companies scrapped unverified discussions of a merger due to a disagreement on valuations.

The publication claims Zip abandoned the talks after Sezzle asked for more than Zip was willing to offer.

The post Zip (ASX:Z1P) share price dives 8% amid US concerns and Sezzle merger rumbles appeared first on The Motley Fool Australia.

More reading

• ASX BNPL shares tumble today amid US probe
• Why Blackmores, Mesoblast, Vulcan, and Zip shares are sinking
• Why is the Sezzle (ASX:SZL) share price tumbling 7% today?
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• What has experts worried about ASX BNPL shares in 2022?

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended AFTERPAY T FPO. The Motley Fool Australia has recommended PayPal Holdings. 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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The Vanguard Australian Shares Index ETF (ASX: VAS) has had a reasonably solid year in 2021 (touch wood). VAS units have, as of today, appreciated by roughly 10.65% over the year to date. Including dividend distributions, investors have enjoyed a return of roughly 14.6%.

That compares pretty well against VAS’s 10-year average of 10.26% per annum. But now that 2021 is edging closer to its end, what does 2022 hold for this index ETF?

VAS is, after all, the most popular exchange-traded fund (ETF) on the ASX. And by a mile, too. It currently has more than $9 billion in funds under management, besting the next most popular ETF by several billion.

VAS is a unique ETF in that it is the only major fund to cover the S&P/ASX 300 Index (ASX: XKO). All other major index ETFs covering the Australian share market track the S&P/ASX 200 Index (ASX: XJO).

The additional 100 shares beyond the ASX 200 gives VAS more diversification and exposure to small-cap shares than other ASX index ETFs.

So what should investors look out for in 2022?

2022: A VAS-t opportunity?

VAS, like most ETFs, is weighted by market capitalisation, meaning the largest companies on the index that it tracks have the largest weightings in the fund’s portfolio. So if we want to track how VAS might perform next year, we only need to look at its largest holdings. As of 30 November, VAS had the greatest weightings in the following ASX shares:

1. Commonwealth Bank of Australia (ASX: CBA) with a fund weighting of 7.47%
2. CSL Limited (ASX: CSL) with a weighting of 6.56%
3. BHP Group Ltd (ASX: BHP) with a weighting of 5.45%
4. National Australia Bank Ltd (ASX: NAB) with a weighting of 4.23%
5. Australia and New Zealand Banking Group Ltd (ASX: ANZ) with a weighting of 3.57%
6. Westpac Banking Corp (ASX: WBC) with a weighting of 3.54%
7. Macquarie Group Ltd (ASX: MQG) with a weighting of 3.27%
8. Wesfarmers Ltd (ASX: WES) with a weighting of 3.03%
9. Woolworths Group Ltd (ASX: WOW) with a weighting of 2.32%
10. Telstra Corporation Ltd (ASX: TLS) with a weighting of 2.27%

So even though VAS invests in a portfolio of 300 ASX shares, these top 10 stocks make up more than 40% of the ETF’s weighting. ASX bank shares (the big 4 and Macquarie) make up 22% just by themselves.

As such, we can say with some conviction that VAS’s fortunes are rather intertwined with those of ASX bank shares. If ASX bank shares have a year in 2021 like they have had (so far) in 2021, then VAS will likely also have a solid year.

If CSL and BHP join the party, then things will get even better for VAS units.

So if you’re invested in VAS, keep an eye on these shares next year. Generally, whenever ASX banks go up, the VAS share price tends to follow.

 

The post Invested in VAS shares? Here’s what to watch in 2022 appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen owns National Australia Bank Limited and Telstra Corporation Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended CSL Ltd. The Motley Fool Australia owns and has recommended Telstra Corporation Limited and Wesfarmers Limited. The Motley Fool Australia has recommended Macquarie Group Limited and Westpac Banking Corporation. 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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The EML Payments Ltd (ASX: EML) share price is tumbling this morning after the company vowed to “vigorously defend” itself against a class action.

EML Payments is being sued by its own shareholders who claim the company engaged in misleading and deceptive conduct and breached its disclosure obligations earlier this year.

At the time of writing, the EML Payments share price is trading at $3.11, 4.6% lower than it was at yesterday’s close.

Let’s take a closer look at the lawsuit facing the financial services company.

EML share price plummets on more class action news

The EML share price is in the red amid more news of a class action claiming it failed to properly inform the market of the Central Bank of Ireland’s concern regarding potential anti-money laundering and counter terrorism financing framework breaches.

On 19 May, the company announced its subsidiary PFS Card Services Ireland Limited had been approached by the regulatory body regarding its concerns.

That was particularly worrying as most of the company’s European operations are run through the business.

By the end of the day, the EML share price had tumbled 45%. It’s still trading 36% lower than its level prior to releasing the announcement.

As The Motley Fool Australia reported yesterday, the class action alleges the company received notice from the Irish entity on 13 May.

Yet, it didn’t disclose the information for days after it became aware of the issue.

It’s worth noting, 13 May was a Thursday. Shares in the company traded that day and on Friday 14 May. The EML share price was put into a trading halt before the ASX opened on Monday, 17 May.

The class action is being brought about by Shine Lawyers. It was filed in the Supreme Court of Victoria yesterday.

In today’s release, the company defended itself, saying: “EML considers that it has at all times complied with its disclosure obligations in that regard. EML has not been served with the proceeding at this time, denies any liability and will vigorously defend the proceedings.”

Right now, the EML share price is 26% lower than it was at the start of 2021. However, it has gained 7.5% since this time last month.

The post EML (ASX:EML) share price plunges on vow to ‘vigorously defend’ against class action appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended EML Payments. The Motley Fool Australia owns and has recommended EML Payments. 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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It isn’t just Healius Ltd (ASX: HLS) announcing an acquisition today, rival Sonic Healthcare Limited (ASX: SHL) has also announced one this morning.

And just like the Healius share price, this hasn’t stopped the Sonic share price from dropping into the red.

Sonic’s shares are down almost 1% to $43.87 at the time of writing.

Sonic share price lower despite US acquisition

This morning Sonic announced the acquisition of US-based medically led anatomical pathology company, ProPath for an undisclosed fee. The deal will be funded from cash and available debt lines and be immediately earnings per share accretive.

According to the release, ProPath was established in 1966 and currently generates annual revenue of US$110 million. It has a team of ~50 pathologists and serves over 1,000 physicians and more than 20 hospital groups across 45 States.

Management believes the acquisition of ProPath is a very significant additional step in the ongoing development of Sonic’s anatomical pathology and clinical laboratory operations in the US. It also expects it to support the company’s long-term strategy of integrating the disciplines of anatomical pathology and clinical laboratory testing together as a seamless service in the USA.

This certainly is a worthy market to target. The release notes that the US anatomical pathology market is estimated to be in excess of US$10 billion per annum. This is in addition to the >US$70 billion clinical laboratory market. Positively, Sonic is already one of the largest participants following previous acquisitions, including the Aurora Diagnostics transaction in 2019.

Sonic Healthcare’s CEO, Dr Colin Goldschmidt said: “Together with Dr Jerry Hussong, CEO of Sonic Healthcare USA, I am delighted to warmly welcome the entire ProPath team to Sonic Healthcare. ProPath has an outstanding reputation as a top-quality pathology company, with outstanding pathologists, managers and staff who have driven strong organic growth over decades based on clinical expertise and focus on physician and patient satisfaction. The cultural alignment between ProPath and Sonic, centred on Medical Leadership, will ensure the success of the integration and promote positive outcomes for the whole of Sonic Healthcare USA.”

The post Sonic Healthcare (ASX:SHL) share price struggles despite US acquisition 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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended Sonic Healthcare Limited. 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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The Transurban Group (ASX: TCL) share price is edging higher in early morning trade on Friday. This comes after the company announced a revised agreement to proceed with the West Gate Tunnel project in Melbourne.

At the time of writing, the toll road operator’s shares are fetching $13.69, up 0.66%.

Transurban reaches agreement with Victorian Government

In today’s statement, Transurban advised that it will now deliver the West Gate Tunnel project by late 2025.

The revised terms of the contract were mutually agreed upon with the Victorian Government and the CPB John Holland Joint Venture (D&C subcontractor).

The parties involved are now finalising the formal documentation. This is expected to be completed by early 2022.

This follows disputes that arose between the project parties relating to changes in the requirements for disposal of soil potentially contaminated with PFAS.

Transurban said it remained confident of its legal position but agreed to the revised terms to accelerate the project’s completion.

Under the modified terms, the D&C subcontractor has committed to commence tunnelling in early 2022.

The total cost of the D&C contract has been increased by $3.4 billion. Transurban and the Victorian Government will each contribute $1.7 billion.

Additional costs to Transurban of approximately $300 million include site activation and insurance fees, and project management expenses.

Furthermore, Transurban will also incur revenue impacts due to the now delayed completion date. The D&C subcontractor withdrew their claims to additional construction costs, which were significantly higher than the agreed contract sum adjustment.

Transurban CEO, Scott Charlton, commented:

We recognise this situation has been disappointing, however we believe this agreement represents the best path forward to deliver the West Gate Tunnel Project in the interests of all stakeholders, particularly the millions of Victorian motorists who will benefit from a vital alternative to the West Gate Bridge and a second river crossing.

Transurban share price summary

Over the past 12 months, Transurban shares have moved in circles, down 3.18%. Year to date, the company’s shares are fairly flat for the period, up just 0.74%.

Transurban commands a market capitalisation of roughly $41.8 billion, making it the thirteenth largest company on the ASX.

The post Transurban (ASX:TCL) share price edges higher despite $1.7 billion West Gate Tunnel blowout 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 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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“Meaningful and sustainable change has been made to the way the bank operates” according to National Australia Bank Ltd. (ASX: NAB) chair Phillip Chronican in his address to shareholders today.

This comes as the result of a series of structural reforms made in consequence to the bank’s internal review into governance, accountability and culture in 2018, and following the Financial Services Royal Commission, Chronican says.

The address also confirmed the bank is changing the way it pays its “colleagues”, shifting 12,000 bankers onto “100% fixed pay”, whilst holding senior leaders accountable by keeping a sum of their pay at risk.

In a lengthy dialogue, NAB’s chair and CEO, Ross McEwan, gave an extensive overview of the bank’s cultural and structural shifts that are ongoing, and what to expect for the future. Here are some of the key takeouts.

Scaling up, sustainably?

NAB’s acquisition of ‘neobank’ 86 400, and the proposed acquisition of Citigroup’s Australian consumer business will enable it to quickly build scale up its digital and consumer offerings, the bank says.

Not only that, but NAB’s Strategic Net Promoter Score increased four points to -7 in FY21. This is equal first amongst its peers and marks a 10-point increase from -17 in 2019, the release notes.

NAB also noted that future dividends will be guided by a target payout ratio in the range of 65% to 75% of
sustainable cash earnings, subject to circumstances at the time.

Shareholders enjoyed a cash Return on Equity (ROE) of 10.7% in FY21, a 2.4 percentage point gain over the last year. However, this is still behind its pre-pandemic figures.

Its capital ratio at the end of September 2021 was 13%, and thus above the target range of 10.75% to 11.25%. As such, NAB’s “preference” is to reduce its share count, so it can deliver “better earnings and dividends per share over the long term”.

This is already underway through its $2.5 billion share buy-back, which started in August and is approximately 40% complete already.

NAB also says that it is winding down its financing of fossil fuels over time, while at the same time growing exposure to renewable energy finance. For instance, it notes that it is the only major Australian bank so far to “have set an upper limit on oil and gas extraction and production exposures, and to put restrictions on lending to greenfield gas projects”.

Specifically, Chronican noted that NAB “will not directly finance any greenfield oil extraction project or onboard new customers predominantly focused on oil extraction [nor] we will not lend to new thermal coal mining projects or take on new thermal coal mining customers”.

Target exposures to thermal coal mining are set to be effectively zero by 2030, aside from residual performance guarantees to ensure site rehabilitation, according to the release.

For its own actions, NAB is also “well progressed in [its] target to source 100% of [its] own electricity from renewable sources by 2025”.

Management commentary

Speaking on the announcement, Ross McEwan, NAB’s Managing Director & CEO said:

About half of our 1.3 billion dollar investment spend in the 2022 financial year will be discretionary and will be directed to key strategic initiatives such as further simplification and automation of our systems, as well as enhanced use of data and analytics, to help customers and our bankers. Partnerships in Australia and globally are helping us innovate faster and develop world-class products and services for our customers. We are working with international non-competing banks, big tech and fintech to access global scale and ideas, looking beyond domestic peers as a competitive benchmark. We are investing heavily to protect customers, the bank, and the broader financial system from the growing threat of cyber security, fraud and financial crime.

NAB shares have gained 22% in the last 12 months after rallying around 28% this year to date.

The post Sustainable change? NAB (ASX:NAB) share price spikes after AGM today appeared first on The Motley Fool Australia.

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The author has no positions 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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ASX buy now, pay later (BNPL) shares including Afterpay Ltd (ASX: APT) and Zip Co Ltd (ASX: Z1P) are sinking this morning after US authorities launched an investigation into the sector.

The United States-based Consumer Financial Protection Bureau (CFPB) issued orders to 5 BNPL companies.

The bureau is undertaking the probe to see if BNPL players need to be better regulated and if US consumers are adequately protected.

At the time of writing, the Afterpay share price has plummeted 7.44% to $82.84, while Zip shares are trading 6.97% lower at $4.14.

ASX BNPL shares caught up in consumer probe

The 5 companies targeted in the probe include Afterpay, Zip, Affirm Holdings Inc (NASDAQ: AFRM), Paypal Holdings Inc (NASDAQ: PYPL) and Swedish fintech Klarna.

US investors responded swiftly to the news with Affirm shares crashing by 10.6%, while the Paypay share price lost 1%. It is likely that Paypay is better insulated as BNPL is not its main business.

In its release, the CFPB highlighted concerns over “accumulating debt, regulatory arbitrage, and data harvesting in a consumer credit market already quickly changing with technology”.

CFPB director Rohit Chopra said:

Buy now, pay later is the new version of the old layaway plan, but with modern, faster twists where the consumer gets the product immediately but gets the debt immediately too.

We have ordered Affirm, Afterpay, Klarna, PayPal, and Zip to submit information so that we can report to the public about industry practices and risks.

Areas of concern

The watchdog is specifically concerned about three areas, including accumulation of debt. Unlike layaway (called layby here) that are typically used for the occasional big purchases, it believes BNPL can quickly become a regulator habit for consumers making smaller but more frequent purchases.

CFPB is concerned that BNPL users can quickly lose track of payments and their growing debt. Consumers can be hit with big fees for missing payments.

Further, as BNPL “credit” is relatively easily given, consumers could end up spending more than they intended.

Are better regulations needed internationally?

The other issue of concern is regulatory arbitrage where BNPL companies may not be following consumer protection laws. For instance, some BNPL products do not provide certain regulatory disclosures.

Also, BNPL applicants do not get the same protections compared to if they were applying for a credit card, even though the application process may look similar.

Afterpay and Zip shares facing more volatility

Finally, there’s the issue of data harvesting. BNPL operators have access to valuable customer data, such as payment histories.

CFPB wants to understand how BNPL companies are using the data. Some companies may be using it for behavioural targeting and data monetisation. This is similar to criticisms levelled against Amazon.com, Inc (NASDAQ: AMZN).

Having said that, the US probe shouldn’t come as too big a surprise to investors. Afterpay, Zip and other BNPL players in Australia have also been subject to similar investigations.

CFPB said it was working with its international partners in Australia, Sweden, Germany and the United Kingdom.

The post ASX BNPL shares tumble today amid US probe appeared first on The Motley Fool Australia.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Motley Fool contributor Brendon Lau owns AFTERPAY T FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended AFTERPAY T FPO and ZIPCOLTD FPO. The Motley Fool Australia owns and has recommended AFTERPAY T FPO. The Motley Fool Australia has recommended Amazon and PayPal Holdings. 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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Dusk Group Ltd (ASX: DSK) shares are surging today after the company announced an acquisition.

The Dusk share price is currently trading at $3.09, up 5.8% from yesterday’s closing price of $2.92.

Shortly after the market opened this morning, the share price soared to $3.20, up 9.6%.

Dusk is an Australian retailer of home fragrance products with a significant in-store and online presence.

What did Dusk announce today?

Dusk informed ASX investors that it will take over Eroma Group for $28 million.

Eroma is touted as Australia’s leading supplier of candle-making inputs, including fragrance oils, waxes, packaging, and candle-making kits.

The investment will significantly boost Dusk’s online presence. In the year to date, 65% of Eroma’s sales have been online. In contrast, Dusk recorded just 8% of sales online in the same time frame.

The acquisition will involve a $15 million cash payment and a $13 million share placement.

These shares will be issued to all Eroma shareholders including CEO Shane McGrath, who has a 55% stake in the company.

Eroma will continue to trade as a freestanding company within the Dusk Group.

Management comment

Commenting on the acquisition, Dusk managing director and CEO Peter King said:

The acquisition enlarges and diversifies our position in the home fragrance market. It substantially increases the scale of our online operations.

The transaction affords us the opportunity to more fully vertically integrate our sourcing and distribution operations and gives us scope to share certain group resources to enhance performance of both businesses in our group.

Eroma will continue to be led by a strong and focussed management team, and we are excited to welcome them to the dusk family.

Dusk share price snapshot

The Dusk share price has skyrocketed by 65% in the past 12 months. It has zoomed up by about 42% in the year to date.

Dusk commands a market capitalisation of roughly $196 million based on today’s share price.

The post Dusk share price (ASX:DSK) surges 9% on $28 million acquisition appeared first on The Motley Fool Australia.

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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 recommended Dusk Group Limited. 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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The Corporate Travel Management Ltd (ASX: CTD) share price has returned from its trading halt and is falling.

At the time of writing, the corporate travel specialist’s shares are down 2.5% to $21.72.

Why is the Corporate Travel Management share price falling?

Investors have been selling down the Corporate Travel Management share price after it announced the completion of the institutional component of its capital raising.

According to the release, the company raised $75 million via an institutional placement at $21.00 per new share. This represents a 5.8% discount to the Corporate Travel Management share price prior to the trading halt.

Corporate Travel Management will now push on with its $25 million share purchase plan. These funds will be raised at the lower of the placement price or the five-day volume weighted average price on its closing date.

Why is the company raising $100 million?

The proceeds from the capital raising will be used to acquire the Australian and New Zealand corporate and entertainment travel businesses of Helloworld Travel Limited (ASX: HLO) for $175 million.

This comprises $100 million in cash and $75 million in shares. The latter will be escrowed for 12 months from the date of completion.

Management believes the acquisition will be highly complementary and add industry verticals which are expected to perform strongly as the recovery from COVID-19 continues.

It also expects the deal to be approximately 3% earnings per share accretive excluding synergies and 7% including full run-rate synergies.

The response

A number of brokers responded positively to the deal. One of those was Macquarie Group Ltd (ASX: MQG). In response, the broker upgraded the company’s shares to an outperform rating with an improved price target of $24.70.

Another was UBS. Yesterday its analysts retained their buy rating and lifted their price target to $27.75.

The post Corporate Travel Management (ASX:CTD) share price drops after raising $75m 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 no position in any of the stocks mentioned. The Motley Fool Australia has recommended Corporate Travel Management Limited. 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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