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Kogan (ASX:KGN) is doing a $115 million capital raising. Should you take part?

Kogan.com (ASX: KGN) has entered a trading halt to do a $115 million capital raising.

What is Kogan.com?

Kogan.com is an online business that was set up by Ruslan Kogan in 2006 in his parent’s garage. Kogan.Com offers a variety of products and services including Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Internet, Kogan Insurance and Kogan Travel. Kogan.Com aims to offer consumers price leadership through digital efficiencies.

Kogan.com’s capital raising

The online business has announced a capital raising this morning.

There will be a $100 million fully underwritten placement at an offer price of $11.45 per share. Kogan.com will then do a share purchase plan (SPP) for existing shareholders to raise up to $15 million. Regular shareholders will be able to start taking part on 18 June 2020.

The offer price of $11.45 is a 7.5% discount to the last closing price yesterday of $12.38. The new shares issued will represent around 9.2% of the company’s existing shares.

Why is Kogan.com doing a capital raising?

The raised money will be used to provide financial flexibility to quickly act on future acquisition opportunities. Two of the previous investments that it has made have been Dick Smith and Matt Blatt.

Kogan.com said it is able to drive value from businesses with a strong brand by leveraging its existing systems, processes, supply chains and technology.

Kogan.com CEO Ruslan Kogan said: “Kogan.com is committed to making the most in-demand products and services more affordable and accessible. Our long-term strategy has enabled us to thrive in the current challenging environment, and we are now in a better position than ever to take advantage of growth opportunities.”

Should investors take part?

The company is reporting very strong growth at the moment. The discount is quite nice, but the share price has run hard. I’m not sure the capital raising is a clear buy like the raising a couple of months ago. I’d have preferred to buy Kogan shares when it was under $5. It depends what Kogan does with the money.

If it can find some great investment opportunities then it could be a smart move to buy troubled retailers and then just have a ecommerce offering.

Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned. 

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