Sezzle (ASX:SZL) share price rises on capital raising update

The Sezzle Inc (ASX: SZL) share price is seemingly rising on the back of the successful completion of its share purchase plan (SPP). At the time of writing, Sezzle shares have jumped nearly 7% in morning trade to $7.63.

Sezzle completed a $79.1 million placement in July and was looking to a raise a further $7.2 million via a SPP. The SPP was open to 6,055 eligible shareholders to apply for up to $30,000 worth of new shares.

SPP closes heavily oversubscribed

This morning, Sezzle revealed its SPP was significantly oversubscribed, receiving valid applications totalling $78.2 million from 4,395 shareholders. That’s right, $71 million in oversubscriptions. This represents a participation rate of 72.6% and an average application amount of around $17,800.

However, it’s important to note that the SPP was conducted at just $5.30 – a 24% discount to the last closing price when the capital raising was announced or a 26% discount to yesterday’s closing price. It’s no wonder shareholders were so keen to participate.

Sezzle will scale back the applications on a pro-rata basis, with participating shareholders set to receive an allotment of ~7.1% of their holding.

Management commentary

Commenting on the response to the Sezzle’s SPP, Executive Chairman and CEO, Charlie Youakim said:

“On behalf of the Board, I would like to thank the Company’s CDI holders for their strong support through the SPP in raising the target of A$7.2m following the successful completion of the recent placement which raised A$79.1 million (before costs). The Company is now well capitalised to accelerate its growth strategy as announced on 10 July 2020.”

What will the funds be used for?

As detailed in Sezzle’s capital raising presentation on 10 July, there are four key priorities for the proceeds of the raising.

Nearly half of the funds (US$27 million) are set to be spent on sales and marketing, which will see additional business development and marketing personnel join the team.

Close to a quarter of the funds (US$14 million) will be spent on product enhancement and expansion, where Sezzle will hire additional developers and software engineers for enhancements and development for its platform.

Expansion into Canada and cost testing in other international markets have been given an 18% allocation of the funds (US$11 million), while the remaining 13% (US$8 million) will be used to bolster Sezzle’s balance sheet and cover the costs of the equity raising.

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Disclosure: At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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