The share price of Purple Group, the owner of the EasyEquities trading platform, fell nearly 13% yesterday after it announced that it had received JSE approval to proceed with a R150 million rights offer.
The share price traded at R1.05 around midday, after falling consistently from R2.42 that it traded at a year before on the same day.
CEO Charles Savage said in a telephone interview that he was happy the planned rights offer – to raise R105m for Purple Group and R45m for EasyEquities – had been well received by shareholders, some of whom had chosen to partially underwrite the offer.
“We made the offer at a good discount to the share price. We chose to give the benefits of the capital raise to our shareholders. We could have raised debt, but the benefits would have gone to the lenders. This way all our shareholders have a chance to benefit,” he said.
He said the capital to be raised was sufficient for their expansion and development plans for the next 18 months, and there were no plans beyond that which might require capital at this stage. However, he did not rule out the possibility of taking on new opportunities that may arise in the months ahead.
Earlier this month the share price had also fallen hard on the release of Purple’s interim results, when the rights issue was first announced and where the company reported it had swung into a loss, with a 152% decline in headline earnings to a 0.85 cents headline loss per share.
This was after its key operations, new customers and new partners continued to grow at a healthy rate, but expenses increased sharply as new projects took longer and proved more costly than expected to implement.
The group said in a statement yesterday the rights offer was to pursue local and international expansion through acquisitions and the development of strategic projects.
EasyEquities intended to accelerate product and regional expansion to at least four new markets to drive earnings, capital and growth, which required investment to build the team, platform and partnerships.
The rights offer was partially committed and partially underwritten – shareholders, representing about 27.12% of the issued shares, had committed to follow their rights, and Sanlam Investment Holdings, the underwriter of the offer, had agreed to underwrite shares that were not subscribed for by existing shareholders in the offer.
The rights offer will consist of 129 629 630 renounceable rights to subscribe for new Purple Group shares in the ratio of 10.20567 rights offer shares for every 100 Purple Group shares held.
The offer issue price represents a discount of about 31.87% to the seven-day average price of Purple’s share price, up to market close on Tuesday.
The rights offer shares will constitute about 9.25% of the ordinary shares, post the offer.
Business Venture Investments, Base SPV Partnership A, Gajoder Investments and Rae's Creek Trust, which between them own 27.12% of the issued shares, had committed to follow their rights in the rights offer in full.
One of the group’s key projects is partnering with GCash, the largest growing mobile wallet in the Philippines that services more than 70 million people in that country, which Purple Group said previously would “prove to be the most significant value-creating event in our history”.
BUSINESS REPORT