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The Novonix Ltd (ASX: NVX) share price is rising this morning. This comes as Sayona Mining Limited (ASX: SYA) shared news it has partnered with Novonix to test the miner’s high-purity lithium hydroxide. Sayona states samples from its Authier Lithium Project have the potential to deliver a minimum of 99.97% purity lithium hydroxide. 

Today’s news comes as the developer and supplier of lithium-ion battery’s share price finish a month of generally poor performance. Even with today’s gains, it’s down 19.93% since 1 March.

At the time of writing, the Novonix share price is up 7.41%, trading at $2.32.

Here’s what we know about the Novonix share price today.

Today’s news of Novonix

Today, Sayona announced it has partnered with Novonix. The aim of this partnership is to test its high-purity lithium hydroxide and, hopefully, develop batteries for electric vehicles. 

Under agreements made by Sayono, spodumene samples from Sayona’s flagship Authier Lithium Project will be processed into lithium hydroxide. This will be conducted by Australian hydroxide technology provider ICS Lithium. Furthermore, it will use the ICS closed-loop refining system. Novonix will then test its conformity with lithium-ion battery standards and its performance against commercial battery products.

Sayona is aiming for the tests to highlight the Authier Project’s ability to deliver a minimum 99.97% lithium hydroxide product. This is suitable for leading battery cathode makers.

Testing by Novonix will begin in May. Additionally, testing will include the development of a battery cell based on Authier’s lithium product. 

The month that’s been for Novonix

Novonix ended February having just completed a $115 million placement to fund an increase of production of anode materials to 10,000 tonnes per year. It was also to go towards the research and development of its cathode and other battery technologies. As well as pursuing international growth opportunities and covering corporate costs.

The placement was announced on 25 February and finalised the following day. As a result, in the first trading week of March, the Novonix share price drop 18%.

Though March brought plenty of positive news from Novonix, its share price never managed to fully recover.

First, it shared the good news of testing for high-performance lithium-ion batteries using Lake Resources (ASX: LKE) 99.7% purity lithium carbonate.

Next, on 5 March the company announced it has entered into placement agreements with 4 of its directors, issuing new shares to their directors or their associates for $2.90 apiece. On the day this news came, the Novonix share price opened and closed for $2.40. Perhaps this over-cost placement reassured investors that the share price at the time was a particularly good deal. By the end of the following trading week, the Novonix share price had risen by 15%.

Finally, the company was added to the All Ordinary Index (ASX: XAO) on 12 March.

The Novonix share price has ended all but three trading days since then at a loss. It’s dropped a total of 21.74%.  

Novonix share price snapshot

While March wasn’t kind to the Novonix share price, it’s having a great year on the ASX. It’s currently up 87.9% year to date. It is also a massive 1,065% up over the last 12 months.

The company has a market capitalisation of around $855 million, with approximately 396 million shares outstanding.

More reading

• The Sayona (ASX:SYA) share price is tumbling 5% today
• Piedmont Lithium (ASX:PLL) shares in trading halt after proposed US public offering
• Why the Lake Resources (ASX:LKE) share price up 6% today
• Why the Sayona Mining (ASX:SYA) share price is rocketing 25%
• Victoria to tax electric vehicles? What this could mean for ASX lithium shares

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On Wednesday I looked at three ASX shares that brokers have given buy ratings to this week.

Unfortunately, not all shares are in favour with them right now. Three ASX shares that have just been given sell ratings by brokers are listed below. Here’s why these brokers are bearish on them:

AGL Energy Limited (ASX: AGL)

According to a note out of UBS, its analysts have retained their sell rating and $10.10 price target on this energy company’s shares. This follows the announcement of its plan to split into two separate businesses. While the broker sees positive in the New AGL business, it suspects that investor appetite for PrimeCo will be low due to its thermal coal assets. UBS appears to be waiting for further clarification on the plans before making any changes to its recommendation. The AGL share price is now trading below this price target at $9.70.

Commonwealth Bank of Australia (ASX: CBA)

A note out of Morgan Stanley reveals that its analysts have retained their underweight rating and $79.00 price target on this banking giant’s shares. According to the note, the broker believes that Commonwealth Bank’s strong capital position will allow it to undertake a share buyback in FY 2022. However, this isn’t enough for a change of rating. The broker continues to believe that its shares are expensive and sees more value in other banks. The CBA share price is fetching $85.86 on Thursday.

Virtus Health Ltd (ASX: VRT)

Another note out of Morgan Stanley reveals that its analysts have retained their underweight rating and $5.05 price target on this fertility treatment company’s shares. The broker notes that the industry is growing at a stronger rate than it was expecting. However, due to valuation reasons, its analysts believe that Monash IVF Group Ltd (ASX: MVF) is the best way to gain exposure to the industry. The Virtus Health share price is trading at $6.10 this afternoon.

More reading

• Commonwealth Bank (ASX:CBA) sued over ‘misleading’ conduct
• The A2 Milk (ASX:A2M) share price was down almost every day in March
• Why AGL, Bubs, Harvey Norman, & Openpay are tumbling lower
• Here’s why the Spirit (ASX: ST1) share price is up 5% this morning
• Here are the US shares ASX investors have been buying

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Virtus Health 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 Pursuit Minerals Ltd (ASX: PUR) share price is plummeting in late morning trade. This comes despite the company announcing it has received firm commitments to fund its growth strategy.

At the time of writing, the minerals exploration company’s shares are fetching for 8 cents, down 7.95%.

What’s driving the Pursuit share price lower?

Investors are scrambling to sell Pursuit shares after an impending share dilution from the company.

According to the release, Pursuit advised it has received firm commitments from sophisticated investors to raise $8.25 million through a strategic placement. This will see the issue of roughly 119.5 million new ordinary shares at a price of 6.9 cents apiece.

In addition, the company will issue 3 million new shares to S3 Consortium Pty Ltd (Stocks Digital) for a nil cash consideration. Pursuit is also paying for Stocks Digital’s marketing services through the allocation of its shares. The latest offer amounts to $207,000 worth of services at the same issue price of 6.9 cents per share.

The acting lead manager to the placement, CPS Capital will be paid 6% of the amount raised in cash. Furthermore, Pursuit will issue 20,000 options to CPS Capital for distribution to the brokers who helped support the placement.

The newly created shares will be issued in a single tranche using the company’s existing placement capacity. Furthermore, listing rule 7.1 allows Pursuit to allocate 43,681,768 shares to investors. The company will also use an extension – listing rule 7.1A to issue the remaining 78,057,362 shares. CPS Capital’s options will fall under Pursuit’s listing rule 7.1.

The proceeds of the placement will be used towards a number of strategic initiatives. This includes advancing its development in the Warrior, Combatant, and Gladiator Projects. In addition to providing general working capital.

Management commentary

Pursuit CEO Mr Mark Freeman commented:

The Company is delighted with the strong support for the placement. This raising will provide critical funding to conduct our inaugural drilling at Phil’s Hill Prospect in conjunction with ongoing Geophysics, Geochem, Land Access obligations on the Warrior Tenements.

The Funding will also be used to progress the new Combatant project in the Murchison and the Gladiator Gold project near Laverton. We are very pleased with the professional manner in how CPS Capital has completed the raising. We look forward to delivering for shareholders and stakeholders.

The Pursuit share price has accelerated to more than 2,000% over the past 12 months and is up 280% year-to-date.

More reading

• Here’s why the Pursuit Minerals (ASX:PUR) share price is frozen
• Pursuit Minerals (ASX:PUR) share price rockets 22% higher today. Here’s why

Motley Fool contributor Aaron Teboneras 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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The Afterpay Ltd (ASX: APT) share price has found itself in a rut this March. In particular, sliding ~20% to a four-month low of $101.50 on Wednesday. This also drags its year-to-date performance from a peak return of 33% to negative territory, or down 14.7%. 

At the time of writing, the Afterpay share price is trading for $103.26, up 1.77%. 

Why the Afterpay share price fell in March 

Tech shares falling out of fashion 

Rising bond yields took the spotlight in early March. Benchmark US Government bond yields had slowly crept back to pre-COVID levels, meaning they had more than tripled from August 2020 lows of 0.50% to more than 1.50% in March. 

Yields matter from a number of perspectives. Higher yields, or interest rates, translate to higher borrowing costs for individuals and businesses, which could curb economic activity. 

A higher interest rate could also see a shift away from riskier investments or sectors. Furthermore, moving into lower-risk assets such as bonds or value sectors.

From a valuation perspective, interest rates are also used to determine the fair value of a company. This would involve discounting its projected future cash flows to the present. A stock that is not yet profitable, such as Afterpay, relies on earnings that are in the distant future. A higher interest rate would reduce the value of future earnings. 

Rising yields have put pressure on richly valued tech shares, with the S&P/ASX Information Technology (INDEXASX: XIJ) falling 5.80% in March, compared to the flat ASX 200. 

Competition continues to intensify in the buy now pay later space 

With almost a dozen ASX-listed BNPL players, big banks and online payment giants fighting for market share, the BNPL sector is becoming an awfully crowded space. 

While Afterpay retains its position as BNPL king, increasing competition will likely dampen sentiment and growth expectations. 

Macquarie Group Ltd (ASX: MQG) sees near-term pain for the Afterpay share price 

In a Macquarie research report on 24 March, the broker highlights the bleak near-term outlook for the BNPL sector. 

The BNPL industry has seen explosive growth in the past few years and quickly gained popularity as a payment alternative, but as with many other such trends experienced in the past (China Commodities in 2015, China Autos in 2018), we think an excessive number of participants has entered the industry in the near term resulting in industry overcapacity.

We expect this to be followed by a few years of industry consolidation (i.e. pain for all players) before industry normalisation at a healthier supply/demand equilibrium.

Where does the Afterpay share price go from here? 

Afterpay continues to be a pioneer in the BNPL industry, with recent moves into Southern Europe and a new banking app. The company is pushing ahead. However, the factors above could continue to put pressure on the Afterpay share price in the near-term. 

More reading

• The Zip (ASX:Z1P) share price crashed 29% lower in March
• These were the worst performing ASX 200 shares in March
• Is the ASX tech sector in for more pain?
• Afterpay (ASX:APT) also signs deal with JB Hi-Fi & The Good Guys
• The A2 Milk (ASX:A2M) share price was down almost every day in March

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Afterpay (ASX:APT) share price fell 20% in March appeared first on The Motley Fool Australia.

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At lunch on Thursday, the S&P/ASX 200 Index (ASX: XJO) is on course to start the month on a positive note. The benchmark index is up 0.25% to 6,807.3 points.

Here’s what is happening on the market today:

AMP changes its CEO

The AMP Ltd (ASX: AMP) share price is charging higher today after announcing the exit of its CEO Francesco De Ferrari. Following weeks of speculation, the company has confirmed that he will retire from the role later this year and be replaced by Alexis George from Australia and New Zealand Banking GrpLtd (ASX: ANZ). Ms George is the currently the Deputy CEO at ANZ and was previously the Group Executive Wealth Australia. When she was in the latter role, she oversaw the sale of the business in 2018.

Webjet raises $250 million

The Webjet Ltd (ASX: WEB) share price is sinking today after announcing a convertible note offering to raise $250 million. The net proceeds from the offering are expected to be used to repay $43 million of Webjet’s existing term debt, fund potential acquisitions, and for capital management or general corporate purposes.

Boral announces buyback

The Boral Limited (ASX: BLD) share price has started the month strongly after announcing an asset sale. This morning the building products company revealed that it has completed the sale of its 50% share in the USG Boral joint venture to Gebr Knauf KG. According to the release, the two parties agreed a price of US$1.015 billion (A$1.33 billion) for its share of the business. Boral intends to use some of the proceeds to buy back up to 10% of its shares on issue.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Thursday has been the Boral share price with a 6% gain. This follows the announcement of its buyback. The worst performer has been the Webjet share price with a 5% gain. Investors don’t appear pleased to see the online travel agent raising money yet again.

More reading

• Why AMP, Boral, Rhipe, & Zoono shares are pushing higher
• Webjet (ASX:WEB) share price falls on $250m recovery-readying offer
• Why the South32 (ASX:S32) share price is climbing
• Here’s why the Boral (ASX:BLD) share price is storming 5% higher
• These were the best performing ASX 200 shares in March

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. 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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There are some ASX shares that could be really compelling ideas to look at in April 2021.

Opportunities are always presenting themselves as share prices change, results are revealed and new business announcements are made.

This month could be the time to look at the following three ASX shares:

Temple & Webster Group Ltd (ASX: TPW)

Temple & Webster has a goal of becoming the largest retailer furniture and homewares in its home market.

The company can point to several tailwinds that are helping accelerate its growth. There’s the long-term adoption of online shopping, an acceleration of that trend due to COVID-19, a higher level of discretionary spending because of travel restrictions (and higher saving) and finally there’s the strength of the housing market and unemployment levels.

Temple & Webster is growing rapidly, the FY21 interim result saw revenue increase 118% and earnings before interest, tax, depreciation and amortisation (EBITDA) went up 556% to $14.8 million.

As the ASX share grows, its operating leverage is improving. In the latest result, the fixed cost as a percentage of sales decreased from 11.6% to 7.5%.

The company is cashflow positive and seeing good growth with its trade and commercial division, which saw a revenue increase of 89% year on year.

Temple & Webster says it’s going to continue investing in its operations, customer offering and marketing to keep growing strongly.

According to Commsec, the Temple & Webster share price is valued at 34x FY23’s estimated earnings.

EML Payments Ltd (ASX: EML)

EML Payments that offers a variety of payment services to clients globally. It says that its payment solutions offers options for disbursing payouts, gifts, incentives and rewards. EML has clients across 28 countries in Australia, Europe and North America, with payment solutions in 27 currencies.

EML is one of the ASX shares benefiting from a shift to digital payments.

As the COVID-19 impacts subside, EML is seeing a recovery for some of its most disrupted segments. Shopping centre gift cards have been particularly impacted.

Yet, despite that, the company is forecasting strong growth for the rest of FY21. Revenue for the year is expected to be between $180 million to $190 million (up 48% to 56%) and EBITDA is forecast to be between $50 million to $54 million (up 54% to 66%).

The ASX share continues to win new clients and that is boosting the growth prospects of the business.

Volpara Health Technologies Ltd (ASX: VHT)

Volpara has announced a number of promising business developments over the last couple of months.

The breast screening healthcare tech share has a high gross profit margin and the company recently made a very compelling acquisition called CRA Health.

This acquisition added US$4 million of annual recurring revenue (ARR) for the ASX share and a higher average revenue per user (ARPU), along with a market share of around 6% of US breast screenings. Perhaps mostly importantly, CRA software is integrated with the major electronic health record and genetics companies.

Volpara has already won its largest contract to date thanks to CRA Health and there’s promising progress in Europe that Volpara could start winning important contracts in another region.

The new contracts that Volpara is winning and signing has much higher ARPU than its current level.

More reading

• 2 stellar ASX tech shares to buy in April
• 2 compelling ASX payment shares to buy
• Brokers name 3 ASX shares to buy right now
• 2 little known small cap ASX shares to buy
• Is Temple & Webster (ASX:TPW) the best e-commerce ASX share to buy right now?

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends EML Payments and VOLPARA FPO NZ. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd. The Motley Fool Australia has recommended EML Payments, Temple & Webster Group Ltd, and VOLPARA FPO NZ. 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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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Goldman Sachs Group Inc (NYSE: GS) plans to follow several of its Wall Street peers and soon begin offering exposure to digital assets like Bitcoin (CRYPTO: BTC) to its private-wealth clients, CNBC reported this morning.

The investment bank said it will offer a wide array of investments in digital assets directly through tokens, derivatives, or more traditional financial vehicles.

“There’s a contingent of clients who are looking to this asset as a hedge against inflation, and the macro backdrop over the past year has certainly played into that,” Mary Rich, Goldman’s global head of digital assets, told CNBC.

Rich added, “There are also a large contingent of clients who feel like we’re sitting at the dawn of a new internet in some ways and are looking for ways to participate in this space.”

She said Goldman could begin offering these new investment options within the next three months.

Goldman is just the latest large Wall Street bank to begin offering services for Bitcoin and other digital assets. Earlier in March, Morgan Stanley (NYSE: MS) said it would allow its wealthy clients to invest in three funds that would essentially give them ownership of Bitcoin.

In February, the custodian firm Bank of New York Mellon Corp (NYSE: BK) said it would soon begin to “hold, transfer, and issue” digital assets in the same way it does with stocks or bonds.

This growing adoption among some of the oldest and most storied Wall Street banks continues to support the further integration of digital assets into the traditional financial system.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• ASX 200 Weekly Wrap: ASX 200 gets its mojo back
• Did the Bitcoin (CRYPTO:BTC) price fly too high too fast?
• At today’s Bitcoin price that’ll be 2 Bitcoin for a Tesla Model S
• 3 ways to help protect your ASX share portfolio against inflation
• Is Bitcoin (CRYPTO:BTC) the answer to ASX investors’ inflation worries?

Bram Berkowitz owns shares of Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Bitcoin. 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.

The post Goldman Sachs plans to let wealthy clients invest in Bitcoin appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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It has been a volatile day, but in late morning trade the S&P/ASX 200 Index (ASX: XJO) is on course to start the month with a gain. At the time of writing, the benchmark index is up 0.2% to 6,805.4 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are pushing higher:

AMP Ltd (ASX: AMP)

The AMP share price is up 4.5% to $1.32. This follows the announcement of the exit of its CEO Francesco De Ferrari. Mr De Ferrari will be replaced by Alexis George from Australia and New Zealand Banking GrpLtd (ASX: ANZ). Ms George is the Deputy CEO at ANZ and was previously the Group Executive Wealth Australia. She oversaw the sale of the latter business in 2018. The new CEO will join the company in the third quarter of 2021.

Boral Limited (ASX: BLD)

The Boral share price has jumped 6% to $5.82. This morning the building products company announced the completion of the sale of its 50% share in the USG Boral joint venture to Gebr Knauf KG. Boral has commanded a price of US$1.015 billion (A$1.33 billion) for the business. While some of the proceeds will be used to pay down debt, a good portion will go towards a share buyback for up to 10% of its issued capital.

Rhipe Ltd (ASX: RHP)

The Rhipe share price has surged 7% higher to $1.67. Investors have been buying the cloud and technology solutions provider’s shares after it announced agreements to acquire EMT Distribution (Australia) and EMT Distribution (Singapore) for $11 million in cash. EMT is an Australian headquartered cyber security distribution specialist. It focuses on sourcing innovative security software vendors and working with channel partners to deliver both on-premise and cloud-based security solutions.

Zoono Group Ltd (ASX: ZNO)

The Zoono share price has rocketed 31% higher to 78.5 cents following the release of a company update. This morning the biotech company announced that its flagship product, Zoono Microbe Shield, has now been successfully tested against the Human Coronavirus 229E and now meets the US EPA Standard ASTM E1053.

More reading

• Rhipe (ASX:RHP) share price rises on cyber security acquisition
• Here’s why the Boral (ASX:BLD) share price is storming 5% higher
• AMP (ASX:AMP) share price on watch after announcing CEO change
• BlueScope (ASX: BSL) share price could get cut of Biden’s US$3tn boost
• AMP (ASX:AMP) share price slides on Ares update

Motley Fool contributor James Mickleboro 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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The Macquarie Group Ltd (ASX: MQG) share price is sinking today. The negative movement comes after the Australian Prudential Regulatory Authority (APRA) found Macquarie Bank breached certain regulations.

At the time of writing, shares in the financial giant were trading for $151.08 – down 1.15%. By comparison, the S&P/ASX 200 Index (ASX: XJO) is up 0.41%.

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

Macquarie share price down after APRA crackdown

The banking regulator found between the years of 2018 and 2020, Macquarie Bank committed multiple breaches of APRA prudential and reporting standards.

The bank was found to have committed multiple breaches on liquidity reporting and funding arrangements within companies in the group “for the purposes of calculating capital and related entity exposure metrics.”

APRA did point to the fact the breaches are historical and “do not impact on the current overall soundness of Macquarie Group’s capital or liquidity positions.” Yet, the regulator says the infringements raise “serious questions” about risk management practice at the bank. Risk is an important factor when investors decide if the Macquarie share price stacks up.

APRA will now increase Macquarie Bank’s liquidity and operational risk capital requirements. Specifically, APRA will now require the bank:

• To hold a capital overlay of $500 million.
• Add 15% to its cash flow when calculating its liquidity coverage ratio.
• Make a 1% adjustment to the available stable funding component when calculating its net stable funding ratio.

The regulations take effect from today. Macquarie will also have to resubmit and restate regulatory forms to APRA.

Statement by both parties

APRA Deputy Chair John Lonsdale did not mince his words when commenting on today’s action.

APRA’s legally-binding prudential and reporting standards play an essential role in enabling APRA to adequately monitor risks to financial safety and stability. For one of the country’s largest financial institutions to have committed breaches of this nature is disappointing and unacceptable.

He added:

Alongside the enforcement actions, APRA will subject Macquarie Bank to intensified supervision to address the bank’s persistent difficulties in complying with its prudential obligations. We cannot rule out further action as more information comes to light about the root causes of these breaches.

Macquarie Group said in a statement today it has systems in place to avoid a repeat of today’s actions:

Macquarie has a number of programs in place to strengthen capital and liquidity reporting and its risk management framework. These ongoing programs will further assist in addressing issues and improvements going forward.

Macquarie Group Managing Director and CEO, Shemara Wikramanayake, said:

We note the actions announced by APRA and share their disappointment. [The Bank] recognises that while specific historical matters leading to these actions have been addressed, we have continued work to strengthen our operating platform and risk governance. We will work with APRA through a period of intensified supervision to advance this work as quickly as possible.

Macquarie Group share price snapshot

Over the past 12 months, the Macquarie share price has increased by 69.11%. The financial group hit its 52-week record only a few days ago.

The company’s value shot up 7% on the release of its half-year results for FY21.

At its current level, Macquarie Group has a market capitalisation of $54.6 billion.

More reading

• Here’s why the Macquarie (ASX:MQG) share price is attractive
• Why the South32 (ASX:S32) share price is outperforming today
• ASX 200 Weekly Wrap: ASX 200 gets its mojo back
• How do brokers rate the Fortescue (ASX:FMG) share price?
• The ANZ (ASX:ANZ) share price is Macquarie’s top big four bank pick

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie 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 Webjet Ltd (ASX: WEB) share price has dumped this morning after the digital travel company announced its plans to raise $250 million through a convertible note offering. At the time of writing, the Webjet share price is down 4.66% to $5.32 per share.

Additionally, the downward movement comes after Queensland Premier Annastacia Palaszczuk announced the lifting of lockdown across the Greater Brisbane region at noon today.

Positioning for success

As hopes rise of a return to some level of normalcy, Webjet doesn’t want to be underprepared for the situation. Although Australia’s COVID-19 vaccine rollout is behind schedule, the good news is CSL Limited (ASX: CSL) will begin ramping local production of the AstraZeneca vaccine.

The mothballed tourism sector could soon be on track once more. For that reason, Webjet wants to be well-placed to capture the global business-to-business opportunity and accelerate growth in its business-to-consumer market.

The additional funds will allow the company to de-risk the refinancing of the current $130 million term debt due November 2022, resulting in a materially lower cash interest cost than the current arrangement, and allow Webjet to pursue strategic opportunities. Net proceeds will also repay $43 million of existing term debt.

Additionally, the notes will hold a term of 5 years and pay 0.75% per annum on a semi-annual basis. Noteholders will also be able to convert into fully paid ordinary shares at a share price of $6.35. This represents a conversion premium of 22.5% over the reference share price of $5.18.

Why is the Webjet share price falling?

Despite the potential of additional capital, the market is selling off the Webjet share price. There’s a couple of reasons this might be.

Firstly, the reference share price in the note offering is $5.18, compared to the pre-open price of $5.50. Almost 6% lower than the open share price. However, this likely doesn’t hold all too much significance.

Potentially, the note offering today has reminded shareholders of the company’s financial position. Based on the financial position at the end of last year, Webjet held $364.1 million in debt. As a result, the company’s debt to equity ratio was 57.2%. This is typically considered high – particularly when the ratio hovered around 30% prior to the pandemic.

Lastly, it brings the dilution from its $275 million equity raising last year back in focus. Consequently, shareholders have been diluted by 150% – with shares outstanding growing from 186.8 million to 339 million.

The Webjet share price is underperforming the S&P/ASX 200 Index (ASX: XJO), with the index up 0.18% at the time of writing.

More reading

• Qantas (ASX:QAN) share price takes off after latest COVID updates
• ASX 200 dips lower, Webjet drops, REA bids for Mortgage Choice
• Flight Centre, Qantas, & Webjet shares fall on Brisbane COVID lockdown news
• These are the 10 most shorted shares on the ASX
• Why Lynas, Oil Search, Pushpay, & Webjet shares are tumbling lower

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Webjet (ASX:WEB) share price falls on $250m recovery-readying offer appeared first on The Motley Fool Australia.

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