Should You Buy Tassal Group Shares After They Fell 8% Today?

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Videos

Australia’s largest salmon producer Tassal Group Ltd [ASX:TGR] flopped more than 8% today. The stock is now trading around $4.47, giving the company a price-to-earnings ratio of 13.15-times earnings.

What happened to the Tassal share price?

This morning, Tassal announced the completion of their fully-underwritten placement of ordinary shares. $80 million shares were offered to sophisticated and institutional investors.

But the price at which Tassal sold their stock was $4.55. Compared to yesterday’s closing price, they sold the stock at a 7% discount.

Tassal will also be allowing shareholders to buy more stock under a Share Purchase Plan. Tassal expects to raise up to $20 million, offering the stock at a price of $4.475.

Yet it seems that some shareholders sold their positions today, unhappy about the dilution of their holdings.

What now for Tassal Group?

This isn’t a blow to Tassal. Increasing outstanding shares does dilute ownership, and it also decreases earnings per share — two things shareholders don’t want happening.

But raising capital can be a good thing. What it comes down to is what Tassal will use the extra capital for.

According to the company, they plan to improve their equipment and assets (fish) to improve operations. It’s too early to say whether Tassal will be able to improve operations. Investors will have a better picture in a few months’ time when full-year results are announced.

Regards,

Härje Ronngard,

Junior Analyst, Money Morning

PS: It’s not always easy to find growth among the biggest stocks in the market. Unless a company can significantly increase earnings, you’d be lucky to get double-digit returns. That’s why some investors prefer the smaller end of the market.

While small-cap stocks are a riskier investment, they can potentially grow earnings 10-fold in a short space of time. Small-cap specialist Sam Volkering has been on the other end of small-caps running up 1,000% or more.

So far in 2017, Sam hasn’t recommended a losing trade yet. In his advisory service, Australian Small-Cap Investigator, his top three active investments are up 304.57%, 466.04% and 1,624.49%.

To find out more, click here.

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