Cromwell Property’s Share price Drops 5% following Capital Raising

Today, Cromwell Property Group [ASX:CMW] experienced a 5% drop in their share price this morning, off the back of yesterday’s news — which should have seen an opposite reaction.

The property manager yesterday announced the raising of $375 million via an institutional placement in the push for global expansion. This has had a positive impact on its institutional register, but in doing so has possibly ‘sidelined’ their major shareholder, ARA Asset Management in Singapore by not giving them a placement, according to The Australian.

Today, that news was officially finalised.

At time of writing, Cromwell shares are trading at $1.16.

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What’s driving Cromwell Property’s share price rise?

Cromwell is adding $405 million to a $2.3 billion pool of funds, which have been raised by investors in just under two months — in order to increase their development profiles and portfolios. As so, the company has identified $500 million worth of office and retail opportunities in Europe which suit the use of these funds.

CEO Paul Weightman said he was pleased of this morning’s outcome:

The equity raising provides Cromwell with certainty of funding to pursue over $1.0 billion of…value-add development opportunities.

These opportunities will facilitate continued execution of the “Invest to Manage” strategy as well as medium-term growth in enterprise value.

A Share Purchase Plan was also announced yesterday in order to raise $30 million, in which security holders will be able to subscribe to $15,000 worth of new securities.

But with ARA holding 20.7% of Cromwell, and not being given a portion of this placement, tensions are rising between the two companies. A burn for ARA, with the company only last month lifting its holding after Cromwell’s takeover offer for a speculated $1.3 billion from RDI REIT.

It seems ARA sees their value, but Cromwell knows it all too well.

What does this mean for investors?

It appears shareholders have become unsettled by the news and are exiting the stock.

It’s not rare for jittery investors to grow fearful after such a large announcement, but the price movement doesn’t necessarily mean bad news.

After all, the raising of capital tends to dilute the value of shares for a company, at least initially. So now that the funds are raised, we’ll be watching this stock closely.


Ryan Clarkson-Ledward,
For Money Morning

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Ryan Clarkson-Ledward is an Editor at Money Morning.

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