Q: Dear 5i,
I initiated a small position in Zedcore based on your prior recommendations after the Amazon competition threat decreased ZDC’s price - thanks for the timely evaluation. After a short ‘test-drive’ I am considering adding to it. I’d appreciate your take on the bought deal closing Feb 27. Can you explain why the underwriters are paying a premium to the current share price? Also, has the company outlined how it will deploy the $30 million and what is your take on the impact of this new spend on future growth. Thanks for helping me discover these ‘small’ growth companies (Can-PNG! US-NBIS!).
Sincerely, another very happy 5i member
I initiated a small position in Zedcore based on your prior recommendations after the Amazon competition threat decreased ZDC’s price - thanks for the timely evaluation. After a short ‘test-drive’ I am considering adding to it. I’d appreciate your take on the bought deal closing Feb 27. Can you explain why the underwriters are paying a premium to the current share price? Also, has the company outlined how it will deploy the $30 million and what is your take on the impact of this new spend on future growth. Thanks for helping me discover these ‘small’ growth companies (Can-PNG! US-NBIS!).
Sincerely, another very happy 5i member
5i Research Answer:
In a bought deal, the company gets its money from the broker selling group, and the brokers are on the hook for the deal. The stock was $6.27 on the day of the deal announcement, so the $6.00 price was lower, and was set to where the brokers assumed it could be sold. The size of the deal was increased from $27M to $30.5M, implying strong demand. The stock fell more than expected and the market was also week after the deal announcement. ZDC says the money will be used to finance growth in its fleet of towers, to grow its service platform and for general corporate purposes. Revenue is expected to nearly double, and the $$ will give the company room to expand faster if it can.