Q: Bought deal fort PNG, $100M, at $2.66 a share. What does this mean? Seems like a high amount for PNG. Is this to get new sales and prepare/fulfill new larger orders? I believe all this is good news but I defer to the experts. Is it good for shareholders?
5i Research Answer:
A $100M issue is sizeable for a $750M company, but the company is growing fast. The discount is about 20c per share and this will help the sales process. A stronger balance sheet will help in win larger orders, but the company also in its press release specifically mentions the possibility of acquisitions as well. While any issue generally puts pressure on shares, we think it is the right move for the company. It has lots of orders in hand, and the sector is prime for more growth. The deal will get the company approaching $1B market cap, which tends to create more investor interest. We would expect a dip in the share price and then back to normal over the next few weeks.