Tag: Motley Fool

Last week The Motley Fool reported an amazing 435,000 Australians joined the share market last year as the COVID-19 pandemic struck.

But all those rookies who did so well out of high-growth technology shares would now be experiencing losses for the first time.

The general market has been down in the past month, but the S&P ASX All Technology Index (ASX: XTX) especially has suffered — dropping almost 16% since its 11 February peak.

So this would beg the question: will the newbies get anxious and flee, or will they stay the course?

Marcus Today director Marcus Padley reminded rookies that the market they entered is highly unusual.

“If you are new to the stock market and have been successful, know your limitations,” he posted on Livewire.

“You are making money in one of the regular but rare stock market booms. You are in a sentiment bubble. It is not usually this easy. It is not usually this volatile.”

Australians usually talk about real estate, not shares. So the fact that there is public discourse indicates that we’re in a bubble, but not in the traditional sense.

“People do not usually talk about the stock market at 19. People do not usually talk about the stock market on the practice putting green,” said Padley.

“This is a sentiment bubble. Not a stock market bubble — a bubble in attitudes about some (not all) prices. It’s different to a stock market bubble. It is confined to some very popular stocks — are these the only stocks you hold?”

Was it dumb luck or actual skill?

Much like The Motley Fool’s favoured “buy and hold” strategy, Padley said that most of his clients are long-term investors.

He said those people would not have fretted about last year’s rise or this year’s dip.

“I am talking to you guys on the putting green. To my daughter’s 19-year-old friends who have fabulously risked and won, who have turned their JobKeeper money into a small fortune,” he said.

“Look at how much money you’ve lost in the last two weeks playing in the volatile ‘sexy’ (now unsexy) end of the market (BNPL) and ask yourself: Do I have any edge at all other than participation at the right time?”

According to Padley, the rookies that can honestly answer that question will know whether to flee or stay.

“The herd is huge, it’ll return as soon as it left, and it is far easier to reinflate an old balloon than blow up a new one,” he said.

“For all of you out there now losing your gains for the first time, wondering whether you should have sold, not knowing whether you are investors or traders — and especially for those of you who have become stock market know-it-alls in the last couple of months of easy money — you have to decide what you want to do from here.”

More reading

• Why the Emerge Gaming (ASX:EM1) share price is jumping 13% today
• PayGroup (ASX:PYG) share price jumps 7% on updated guidance
• Why the Nuix (ASX:NXL) share price is surging higher today
• ASX lithium shares on watch as lithium prices eye 2-year high
• Here’s why the Sezzle (ASX:SZL) share price is crashing 5% today

Motley Fool contributor Tony Yoo 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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PayGroup Ltd (ASX: PYG) shares are surging higher today after the business software developer upgraded its earnings guidance. As of writing, the PayGroup share price has jumped 7.38% to 65.5 cents.

By comparison, the All Ordinaries Index (ASX: XAO) is up by only 0.11% for the day so far.

Let’s take a closer at what PayGroup announced regarding its earnings guidance.

What did PayGroup announce?

The PayGroup share price received a boost today after the company declared it expects annualised recurring revenue (ARR) for FY21 to be 15% greater than in FY20. The group estimates ARR for FY21 to total $20.5 million. This is despite the effects COVID-19 has had on the business.

In further news pumping up the PayGroup share price, the company revealed it expects to complete approximately $10 million worth of new contracts during the period. That’s an 81.8% increase on FY20. The number of payslips and transactions processed is expected to grow from 4.7 million in FY20 to 5.5 million in FY21.

Full results for FY21 (12 months ending 31 March) will be published in May 2021.

Words from the managing director

Mark Samlal, PayGroup managing director, said the following with today’s update:

FY21 continues to be a landmark year for PayGroup as the business continues to achieve significant growth since our IPO in 2018. The FY21 guidance we have released today highlights the accelerating traction of our multi-country payroll solutions, underpinned by our local regulatory and compliance expertise across [the Asia-Pacific region].

The large customer base of multinational enterprises provides significant organic growth potential as we introduce more customers to the broader HCM product suite. Growth remains the key focus, as we continue to leverage our leading sales capabilities to scale the business in order to maximise shareholder value.

PayGroup share price snapshot

Near the end of March last year, the PayGroup share price reached its 52-week low of 43.5 cents. Since then, the company’s value has increased by more than 50%. Yet, only three months after bottoming out, the company’s shares peaked at 90.5 cents – around 108% higher than their current value.

Based on the current PayGroup share price, the company has a market capitalisation of $50 million.

More reading

• Why the Nuix (ASX:NXL) share price is surging higher today
• ASX lithium shares on watch as lithium prices eye 2-year high
• Here’s why the Sezzle (ASX:SZL) share price is crashing 5% today
• Why the Jupiter Mines (ASX:JMS) share price is down again today
• Here’s why the Pilbara Minerals (ASX:PLS) share price is pushing higher

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The Nuix Ltd (ASX: NXL) share price has started the week in sensational form.

In afternoon trade, the investigative analytics and intelligence software provider’s shares are up 7% to $5.89.

However, despite this strong gain, the Nuix share price is still down 50% from its 52-week high.

Why is the Nuix share price surging higher today?

Investors have been scrambling to buy Nuix shares today after it was named as one of six new additions to the S&P/ASX 200 Index (ASX: XJO) at the next quarterly rebalance.

According to S&P Dow Jones Indices, Nuix will join the illustrious index on 22 March along with Codan Limited (ASX: CDA), Champion Iron Ltd (ASX: CIA), Hub24 Ltd (ASX: HUB), Nickel Mines Ltd (ASX: NIC), and Pilbara Minerals Ltd (ASX: PLS).

They will be replacing the outgoing Bravura Solutions Ltd (ASX: BVS), GWA Group Ltd (ASX: GWA), Sandfire Resources Ltd (ASX: SFR), Smartgroup Corporation Ltd (ASX: SIQ), Service Stream Limited (ASX: SSM), and Tassal Group Limited (ASX: TGR).

Why is this a good thing for Nuix shares?

Being included in the ASX 200 is often good news for a company’s shares as it can lead to increased buying from investors in the near term following the announcement.

This is because certain index funds that track the ASX 200 index will need to buy shares to mirror the changes. Conversely, the shares being kicked out of the index will often underperform due to increased selling.

In addition to index funds, there are many fund managers out there that have strict investment mandates. One common mandate is that they only invest in companies that are listed on the benchmark index.

This means that any fund managers that were wanting, but unable, to invest in Nuix shares, suddenly have the opportunity to do so.

And with analysts at Morgan Stanley recently giving its shares an overweight rating with a lofty $10.75 price target, there might be a few fund managers doing exactly that.

More reading

• Why Nuix, Hub24 shares are on watch
• 2 top ASX growth shares to buy next week
• ASX tech correction? 10 of the worst-hit shares
• Why AVZ, Legend Mining, Nuix, & Vocus shares are surging higher
• 2 ASX shares at 52-week lows: Are they bargain buys?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Bravura Solutions Ltd and Hub24 Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Nuix Pty Ltd. The Motley Fool Australia has recommended Bravura Solutions Ltd, Hub24 Ltd, Nuix Pty Ltd, Service Stream Limited, and SMARTGROUP DEF SET. 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 lithium shares, Galaxy Resources Limited (ASX: GXY), Pilbara Minerals Ltd (ASX: PLS) and Orocobre Limited (ASX: ORE) have taken a breather in recent weeks after posting triple-digit returns in 2020. 

Despite ASX lithium shares not posting significant gains this year, lithium prices have been quietly grinding higher and are eyeing 2-year highs. 

Higher lithium prices to support ASX lithium miners

Fastmarkets provides the latest battery-grade spot lithium prices across China, Europe and the US. The latest update from Fastmarkets highlights: 

• Battery-grade lithium carbonate price in China continued to post slight gains while battery-grade hydroxide paused following the sharp rally in the prior pricing session.
• The battery-grade lithium carbonate price in the seaborne Asian market continued the uptrend, while the equivalent grade hydroxide price kept firm.
• European and United States’ battery prices were firm on support from supply tightness and a good level of demand.

From a pricing perspective, battery-grade lithium carbonate in China has surged to 87,500 yuan (~A$17,340) per tonne, up from November lows of 40,000 yuan (~A$8,000). 

What do brokers think about ASX lithium shares? 

Citi and Credit Suisse are neutral on the Pilbara share price with a respective $1.10 and $0.95 target price. On 17 February, Citi noted that the electric vehicle (EV) market had proven extremely resilient in 2020 despite passenger vehicles weakness. The continued growth and demand for EVs will call for increased demand from materials in the EV battery supply chain. 

UBS is bullish on the Galaxy share price with a $3.60 target price and buy rating on 10 March. The broker eyes its James Bay lithium mine project, which is expected to have a mine life of 18 years based on an average production rate of 330,000tpa. 

Conversely, Morgan Stanley remained underweight for Galaxy shares. It noted that the James Bay lithium project would need to integrate with a lithium chemical producer. The key step once the project moves into production will be finding a downstream conversion partner. The broker retained its $1.50 price target.  

UBS is also buy-rated on the Orocobre share price with a $6.70 target price on 5 March. The broker points to Orocobre’s significant improvement in cost base from US$4,266/t last year to US$3,623/t in December 2020. 

More reading

• Here’s why the Pilbara Minerals (ASX:PLS) share price is pushing higher
• ASX quarterly rebalance: HUB24 joins ASX 200, Brainchip into ASX 300
• Why Nuix, Hub24 shares are on watch
• Goldman reaffirms its conviction buy on this ASX share on Yallourn shutdown
• Top brokers name 3 ASX shares to sell today

Motley Fool contributor Kerry Sun 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 Sezzle Inc (ASX: SZL) share price is not having a fun start to the week today. Sezzle shares are, at the time of writing, down a nasty 5.63% to $7.55 a share.

That still puts the Sezzle share price in the green for 2021 so far, by a healthy 20% in fact. But it also puts it down by around 35% from the highs we saw back in mid-February.

So what’s behind this decisive move downwards for Sezzle today?

Sezzle share price fails to sizzle

Well, today’s Sezzle share price moves are not the result of any official news out of the company. That much we know for sure. The last major announcement Sezzle made to the markets was its FY2020 earnings results back on 26 February. There have been some housekeeping announcements since, but nothing that would conceivably result in today’s moves.

Instead, it looks as though the entire buy now, pay later (BNPL) sector is selling off today. Sezzle’s BNPL brethren Afterpay Ltd (ASX: APT) and (to a lesser extent) Zip Co Ltd (ASX: Z1P) have both sold off today in the face of a rising S&P/ASX 200 Index (ASX: XJO). At the time of writing, Afterpay is down 4.2%, while Zip has shed 1.16%.

This is nothing new though. BNPL shares like Afterpay, Zip and Sezzle have been in the wringer for a while now. This space looks to be taking the brunt of investors’ newfound distaste of highly-valued ASX tech shares as a result of rising bond yields across both the United States and Australia.

Further, as we reported last week, competition in the BNPL space is also heating up. For one, we have the better side of a dozen BNPL companies on the ASX offering very similar services.

For another, we are also seeing US payment giants like PayPal Holdings Inc (NASDAQ: PYPL), American Express Company (NYSE: AXP), Mastercard Inc (NYSE: MA) and Visa Inc (NYSE: V) all dipping their respective toes into BNPL products and offerings.

These companies are massive and truly global. For example, Afterpay, by far the ASX’s largest BNPL provider, has a market capitalisation of $31.14 billion on current pricing. Visa is a ~US$480 billion ($618.5 billion) behemoth by comparison.

But remember, although the falls in the BNPL space look dramatic, they do come off the back of what has been a fantastic year (or more) for these companies. Yes, Sezzle is down 35% from its highs. But it is also still up more than 300% from its pre-COVID high.

On the current Sezzle share price, the company has a market cap of $771.77 million.

More reading

• Can ASX BNPL companies like Afterpay (ASX:APT) compete with Paypal?
• ASX 200 unmoved, Flight Centre soars, Afterpay keeps falling
• 2 small cap ASX shares that are growing rapidly
• ASX 200 sinks 2.4%, Afterpay plunges, AMP jumps
• The Zip (ASX:Z1P) share price has slumped 26% in 8 days

Sebastian Bowen owns shares of American Express, Mastercard, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Mastercard, PayPal Holdings, and Visa. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Sezzle Inc and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Mastercard, PayPal Holdings, and Sezzle Inc. 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 Jupiter Mines Ltd (ASX: JMS) share price is falling again due to its proposed spinoff company Juno Minerals Limited. At the time of writing, the Jupiter Mines share price is trading at 31 cents, down 7.6% from Friday’s close.

Let’s take a look at what the mining company announced today.

More delays

Jupiter Mines’ spinoff company is causing waves today, as its initial public offering (IPO) has been delayed again. The original date for Juno’s IPO was to be March 17 2021, but it has been pushed back to the end of May.

The delays announced today follow the demerger’s halt last week, as one of its major shareholders didn’t want to meet the regulatory requirements of the Foreign Investment Review Board (FIRB). Thus, Juno’s IPO was unable to go ahead.

The delay last week was caused by Stitching Pensioefonds ABP (ABP), holder of 15% of Jupiter’s shares.

Jupiter reported today that a general meeting of its shareholders would be held by the end of April, where the capital reduction and demerger are expected to be re-approved.

Jupiter intends to remove the regulatory requirements of the FIRB as a condition of the transaction. Allowing it to make the changes needed to create the spinoff company.

Jupiter’s CEO Priyank Thapliyal had strong words to say about the IPO’s delay last week.

The IPO and the potential uplift that would have occurred with the construction of Mount Mason in the near term in this robust iron ore price market was the optimal structure to release substantial value for Jupiter shareholders. Needless to say, this has been usurped for all the shareholders by the decision of one shareholder, ABP.

About Juno

A spinoff company from Jupiter Mines, Juno takes control and ownership of Jupiter’s Central Yilgarn Iron Ore assets.

The demerger and IPO of Juno were voted on by Jupiter shareholders in January 2021, with a clear majority voting for the spinoff.

Jupiter intends to provide 200 million shares in Juno, with 80 million available for public offer. The sale of shares will raise the $20 million needed to fast-track the Mount Mason Hematite Project’s development.

Jupiter mines’ share price snapshot 

Over the past 12 months, Jupiter Mines’ share price has risen by more than 45%. 

Based on the current Jupiter Mines share price, the company has a market capitalisation of around $646 million, with approximately 1.9 billion shares outstanding.

More reading

• Why Afterpay, Fortescue, GWA, & Jupiter Mines are dropping today
• Why the Jupiter Mines (ASX:JMS) share price tanked over 7% today

Motley Fool contributor Brooke Cooper 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 Pilbara Minerals Ltd (ASX: PLS) share price is pushing higher on Monday.

In afternoon trade the lithium miner’s shares are up 1.5% to $1.06.

Why is the Pilbara Minerals share price pushing higher?

Investors have been buying Pilbara Minerals shares today following the release of a positive announcement.

According to the release, Yibin Tianyi Lithium Industry Co will provide a US$15 million unsecured prepayment to Pilbara Minerals’ operating subsidiary, Pilgangoora Operations. This will be used to fund the A$22 million improvement works underway on Plant 1 at the operation.

The release explains that the prepayment is in support of Pilgangoora Operations providing up to a further 40,000tpa of spodumene concentrate product to Yibin Tianyi Lithium Industry Co following the successful commissioning of the Stage 1 improvement works.

These are expected to occur in the September quarter and will increase its production capacity by ~30,000 to 50,000tpa at Plant 1.

Management notes that this increased offtake is in addition to the existing 75,000tpa, five-year offtake agreement with Yibin Tianyi announced last year. This will mean its offtake agreement increases to a total of up to 115ktpa of spodumene concentrate.

Management commentary

Pilbara Minerals Managing Director and CEO, Ken Brinsden, commented: “Our relationship continues to grow with Yibin Tianyi as we work together in support of both our businesses’ growth ambitions. For Yibin Tianyi, to become one of the biggest lithium chemical suppliers in China with the support of our major shareholder, CATL and for us to become one of the largest, lowest cost lithium raw material suppliers in the world.”

“We are also extremely proud to welcome SIMPEC and IronMerge to Pilgangoora to execute these improvement works. This joint venture is a demonstration of companies working together to support Aboriginal business enterprises to grow and create opportunities for local people,” he concluded.

More reading

• ASX quarterly rebalance: HUB24 joins ASX 200, Brainchip into ASX 300
• Why Nuix, Hub24 shares are on watch
• Why this broker is bullish about ASX lithium shares
• The Vulcan Energy (ASX:VUL) share price has fallen 17% in 2 weeks
• Orocobre (ASX:ORE) share price dives despite a recovery in lithium markets

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 Tilt Renewables Ltd (ASX: TLT) share price is flying high today after the wind and solar farm owner and operator announced it’s set to be sold off to two separate parties.

Wind of the potential acquisition hit the Australian Financial Review yesterday. The news stated that Tilt Renewables was in the late stages of discussions with Mercury NZ and QIC’s renewable investment group, Powering Australian Renewables (PowAR).

Tilt Renewables board tells ASX they’re all for it

In the announcement provided to the market, the Tilt board has recommended the proposed acquisition. This would entail Mercury NZ acquiring Tilt’s New Zealand operations, while PowAR would acquire the company’s Australian operations. The offer from the consortium is set at NZ$7.80 per share in cash to Tilt shareholders.

The proposal comes just over a month after the renewable infrastructure owner received an initial non-binding indicative proposal to acquire it in early February. At the time, Infratil Ltd (ASX: IFT), Tilt’s largest shareholder, welcomed the proposal. Tilt went on to offer access to information to these companies to carry out due diligence.

Today’s scheme has been fully endorsed by Infratil, as the company agrees to vote its entire 65.5% shareholding in favour of the acquisition.

Based on the current number of outstanding shares, the acquisition price of roughly $7.24 Australian dollars gives Tilt Renewables a market capitalisation of $2.73 billion. If all parties move forward with the deal it would mark the largest renewables deal ever in Australia and New Zealand.

What it means for other ASX listed parties

Today’s news is certainly good for Infratil as well. The foreign investment company provided an update making its support for the acquisition known.

Furthermore, Infratil noted that the carrying value of its stake in Tilt was NZ$704.1 million at the end of September 2020. Hence, the sale price mentioned today represents over four times its book value.

AGL Energy Limited (ASX: AGL) also announced that it will be involved in the acquisition of Tilt due to its 20% interest in PowAR. As a result, AGL will contribute A$341 million towards funding PowAR’s portion of the purchase.

The CEO of AGL, Mr Brett Redman. commented on the update:

The proposed acquisition by PowAR will provide more renewable energy options in AGL’s generation portfolio, further supporting our orderly transition away from coal-fired power and responding to our customers’ increasing appetite for cleaner energy

Tilting towards green

It’s no secret there is a strong push for renewable energy across Australia and New Zealand. Last week’s news of Victoria’s Yallourn power station bringing forward its closure by four years is a sign of the times. As more legacy energy infrastructure assets falter, more renewables will be needed to meet the public’s energy needs. 

Today’s news demonstrates how sought-after renewable infrastructure is becoming. As Tilt Renewables mentioned, the scheme represents a 40% per annum return to any shareholder who invested in the company upon its demerger in 2016. In the past year alone, Tilt shares have been a standout on the ASX, returning 156%. 

At the time of writing, the Tilt Renewables share price is trading 15.36% higher at $7.06.

More reading

• Goldman reaffirms its conviction buy on this ASX share on Yallourn shutdown
• The 3 highest paying ASX 200 dividend shares
• Tilt Renewables (ASX:TLT) share price falls despite wind farm news
• Amaysim (ASX:AYS) share price higher as company moves to delist

Motley Fool contributor Mitchell Lawler 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 Creso Pharma Ltd (ASX: CPH) share price has slipped in afternoon trading today after the company announced an agreement to acquire Halucenex Life Sciences Inc.

The Creso Pharma share price lifted as high as 23 cents just after the market opened this morning as the agreement provides entry into the emerging global market for psychedelic medicines, estimated to be worth up to US$100 billion. Halucenex researches, develops and licences novel psychedelic molecules for the global pharmaceutical and nutraceutical markets. 

However, Creso shares are currently down 1.43%, trading at 20.7 cents at the time of writing. Let’s take a look at what’s happening with the Creso Pharma share price. 

Consolidating after 1,000% surge last year 

The Creso Pharma share price surged as much as ~1,300% last year from 3.5 cents to as high as 47 cents.

This could be attributed to the US House of Representatives passing the Marijuana Opportunity Reinvestment and Expungement Act to remove cannabis from the US Controlled Substances Act. The bill decriminalises cannabis for the first time on a national level. 

While the Creso Pharma share price has taken a breather around the 20 cent level in 2021, the company continues to push forward with several significant announcements and developments in the cannabis space.  

Halucenex acquisition 

Creso said the acquisition was a “first-mover advantage” into the psychedelic medicines sector, positioning itself as the first 100%-owned psychedelic medicines company listed on the ASX. 

Halucenex is currently awaiting the approval of its Controlled Drugs and Substances Dealer’s License. If approved, it will apply to commence a phase 2 clinical trial. The company will conduct research and development on psychedelic substances, including LSD, psilocybin and MDMA. Its phase 2 clinical trial is expected to commence in the third quarter of 2021. 

Halucenex will also seek an amendment to the dealer’s license to produce, package/assemble, sell, transport, import and export psychedelic substances. The company notes that it will not partake in any activities in relation to certain compounds until the company has satisfied the ASX that it is legally compliant. 

Transformational acquisition for the Creso Pharma share price 

Creso Pharma views the acquisition as “transformational”, enabling the company to emerge as a “best-in-class provider of cannabis, cannabinoids and psychedelics alternative medicines to meet the large unmet need for treatments to improve mental health and well being”. 

The Halucenex acquisition will include a $500,000 cash consideration plus ~29.25 million Creso shares and ~17.5 million Creso performance shares. Creso has also agreed to advance Halucenex $250,000 as a loan to fund its operations before settlement. And provide another $1,000,000 in funding during the 12 months following settlement. 

Management commentary

Creso Pharma non-executive chairman Adam Blumenthal believes the acquisition benefits the company on all fronts.

This is a major milestone for Creso Pharma and marks our evolution into a broader based pharmaceutical business. Creso will now sell its trusted cannabis products and progress the commercialisation of a range of psychedelic-assisted psychotherapy treatments. Our entry into this market provides the company with another lucrative vertical and an additional near term revenue stream.

Mental health and PTSD are becoming detrimental to our society and this has been highlighted in the last 12 months. These conditions have been exacerbated by COVID-19 and the available treatments are shown to have limited effectiveness and many side effects. Psychedelic-assisted therapy is a new alternative treatment route, which has considerable promise.

Mr Blumenthal said the acquisition of Halucenex would strengthen the company’s presence in Canada, as well as “provide a number of opportunities in drug development which will inevitably lead to further new market entries and commercialisation opportunities”.

More reading

• The Creso (ASX:CPH) share price fizzles despite new distribution deal

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The Bank of Queensland Limited (ASX: BOQ) share price is trading lower on Monday afternoon.

At the time of writing, the regional bank’s shares are down 1% to $8.79.

Why is the Bank of Queensland share price trading lower?

This morning Bank of Queensland announced the completion of the retail component of its underwritten 1 for 3.34 accelerated pro-rata non-renounceable entitlement offer.

According to the release, the completion of the retail entitlement offer represents the final stage of the bank’s $1.35 billion equity raising. This included an underwritten institutional entitlement offer and institutional placement, which completed last month.

These funds were raised at $7.35 per new share, which was a 12.6% discount at the time.

Bank of Queensland revealed that it received strong support from eligible retail shareholders. It advised that applications totalled approximately $336 million, reflecting a take-up rate of approximately 50%.

In addition to this, approximately $72 million was applied for under its oversubscription facility, with each eligible retail shareholder who subscribed under the facility receiving the full allocation of new shares for which they applied.

However, this meant that the company only raised a total of $408 million from retail shareholders, which was below target. In light of this, 37 million (worth ~$271 million) will be allocated to the underwriters or sub-underwriters of the retail entitlement offer.

These underwriters are likely to be looking to offload these shares onto the market in the coming weeks, which could weigh on the Bank of Queensland share price.

What now?

With the funds raised, Bank of Queensland will now push ahead with its acquisition of Members Equity Bank (ME Bank) for $1.325 billion.

This acquisition is expected to be low double-digit to mid-teens cash earnings per share accretive, including full run-rate synergies in the first year (FY 2022). It is also expected to be cash return on equity accretive by over 100 basis points including full run-rate first year synergies.

The two businesses will have pro forma total assets over $88 billion, with total deposits of more than $56 billion.

More reading

• Wilson Asset Management thinks these 2 ASX shares are a buy
• Bank of Queensland (ASX:BOQ) share price rises as it inks office deal with AMP (ASX:AMP)
• Top brokers name 3 ASX shares to buy today
• Why the Bank of Queensland (ASX:BOQ) share price is up 10% to a 52-week high
• ASX 200 flat: SEEK CEO exits, Afterpay sold off, BOQ surges higher

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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