A Guide to the Afterpay Cap Raise, Trading Halt and Director Share Sale

By ,

Prior to today, Afterpay Ltd [ASX:APT] shares were in a trading halt while it goes for a capital raise.

Today, APT shares came out of their trading halt and are down 2.02%, to $66.63, at time of writing.

The APT share price was on an immense run before the news of a cap raise broke.

It comes as co-founders Anthony Eisen and Nick Molnar are selling $250 million in shares (approximately 10% of their holdings).

Here are the terms of the capital raise:

  • $800 million in new equity
  • $650 million to come via an institutional placement
  • $150 million to be offered to existing retail shareholders via a Share Purchase Plan (SPP) up to $20,000

The institutional part of the cap raise came in at $66.

As for the SPP, retail investors will pay the lower of the price paid by institutional investors, or the five-day volume-weighted average price (VWAP) prior to the SPP closing date.

What happened to the APT share price prior to today?

In case you missed it, the APT share price ripped through resistance at $40 after the March market lows.

You can see the surge below:

ASX APT Share Price Chart - Afterpay Shares

Source: tradingview.com

This came as online channels had increased sales volumes in lockdown.

 Outlook for APT share price

After tacking on more than 700% in the space of a few months, there is a legitimate query as to whether the run can continue.

For a company that is still not profitable, value investors could be turning their nose up.

The APT share price is and may continue retracing briefly after the cap raise.

There are vastly different analyst price targets for APT shares out there.

The AFR notes that UBS had a price target of $27 and is bearish on APT’s prospects.

While Bell Potter has a $81.25 price target and Morgans has a $68.58 price target.

The longer-term concern is, that even if it expands into new countries, it needs to work on monetising a vast user base, which numbers almost 10 million.

I suspect in five years Afterpay could be a mature business that pays a dividend.

And in the medium term, if disposable income dries up in the economies it operates in, then sales growth could taper off.

How the company responds in the coming months and years will be an intriguing story.

Regards,

Lachlann Tierney

For Money Morning

PS: APT started its life as relative minnow. Discover ‘Four Well-Positioned Small-Cap Stocks,’ which could follow a similar trajectory.

About Lachlann Tierney

Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest…

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