What are the implications of Kogan's $115 million capital raise?
As Kogan impresses its shareholders, the fast-growing company has launched a $115 million capital raise.
Kogan share price at all-time highs, raise announced
Kogan’s (KGN) aggressive expansion into a variety different business areas – often only loosely connected, as well as a lofty valuation, has made it a divisive stock amongst ASX investors.
Yet as Kogan announces that it would be tapping the market for $115 million in fresh funds – made up of a $100 million share placement and a $15 million share purchase plan – it’s relevant to look at how the stock has performed recently and over the long-term.
Indeed, Kogan’s meteoric rise – which has seen the stock deliver investors 654.5% in total shareholder returns (TSR) (including dividends) since IPO is nothing short of a monumental achievement.
Yet observers should remember that those gains have come with significant amounts of volatility over the short and medium-term. Specifically, from May 2018 to November 2018 the stock dropped ~70%, and from January to March of this year, it retreated around 40%. In spite of that, Kogan's long-term share price action, at present, remains one of shareholder value creation, not destruction.
On some fronts, this strong share price performance should come as little surprise. Across April and May, Kogan saw its gross sales more than double; while the company’s adjusted earnings (EBITDA) more than tripled in that timeframe, rising 219.3% — on a year-over-year basis.
No wonder the Australian Financial Review recently ran a story titled:
‘Kogan.com worth five times more than Myer.’
Myer, for reference has seen its share price decline over 70% in the last five years.
Details of the raise: key implications at a glance
Stock gyrations aside, the company said it would use the $100 million in funds, from the placement portion of the raise, 'to provide financial flexibility to act quickly on future value accretive opportunities that broaden our offering, expand our customer base or enhance our operating model.'
As part of the today’s announcement, CEO Ruslan Kogan further stressed that the company’s '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.’
Centrally, the $100 million share placement will see ~8.7 million new shares issued at $11.45 per share – representing a shade over 9% of Kogan's issued capital. For reference, Kogan’s stock last traded at $12.380 per share, implying a market capitalisation of $1.17 billion.
The lead managers on the raise are Canaccord Genuity and RBC Capital Markets.
Elsewhere, under the $15 million SPP portion of the raise (which at Kogan's discretion may be upsized), eligible shareholders may subscribe for up to $30,000 worth of SPP shares, at a price of $11.45 per share.
Looking at the equity raising time table, Kogan expects to announce how the placement was received as well as have its trading halt lifted on Thursday. Further out, the allotment and trading of the shares under the placement is expected to take place on Wednesday, 17 June, while the SPP booklet is expected to be issued on 18 June.
How to trade Kogan – long and short
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