The Aussie Broadband Ltd (ASX: ABB) share price won’t be moving this morning after the company placed shares in a trading halt.
Why is the Aussie Broadband share price in trading halt?
Aussie Broadband requested an immediate trading halt this morning pending an announcement regarding a potential capital raising.
“The Company is in the process of making and finalising arrangements in relation to a potential capital raising. The trading halt is requested until an announcement is made to the market in relation to the outcome of the proposed capital raising or the commencement of trading on Thursday, 9 September 2021, whichever is earlier” – Brian Maher, Company Secretary
Why would Aussie Broadband raise capital?
Given the company has $57 million in cash and zero debt, why would Aussie Broadband raise capital from shareholders?
In its most recent annual update, the business called out that it is actively looking for acquisition opportunities. In fact, the business guided that it expects to make at least one acquisition by the end of 2021.
Signalling its intentions, the company appointed a Head of Mergers and Acquisitions (M&A) in April 2021.
The company is looking to expand its customer base through residential and business customers. Additionally, the business is looking to enhance its capabilities in the business segment.
On the investor call, management suggested it may even look into adjacent telecommunication services such as cloud, security and managed services.
How has the Aussie Broadband share price performed recently?
Since its IPO in October last year, the Aussie Broadband share price has increased 4-fold from $1.00 to $4.63.
Just in the last month, the share price is up over 41% after the company announced an 84% jump in sales.
Usually, if the market is suspecting a capital raising, the share price will stagnate in anticipation of the dilution. So, to see the Aussie Broadband share price rally as hard as it has demonstrates there is strong demand for the business’s shares.
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