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Why Megaport is raising $62 million through an institutional placement

James Mickleboro
Businessman paying Australian money

The Megaport Ltd (ASX: MP1) share price won’t be on the move this morning following a trading halt request before the market open.

Why is Megaport in a trading halt?

Megaport requested the trading halt whilst it undertakes a fully underwritten placement to institutional, sophisticated and professional investors.

Megaport is raising approximately $62 million in order to capitalise on its significant first-mover advantage as a global leading provider of Elastic Interconnection services.

It intends to use the funds to accelerate its expansion to new locations and new markets, undertake capacity upgrades, fund innovation and development of new technology, and fund operating costs and general working capital requirements.

Megaport will issue 7.1 million fully paid ordinary shares under the placement at an issue price of $8.70 per share. This issue price represents a 4.8% discount to the closing price of $9.14 on December 4.

Outlook.

The company also provided the market with an update on its outlook. While no formal guidance was provided, management appears very confident on its future prospects.

According to the release, Megaport’s investment in its sales, growing data centre footprint, and integration with more cloud onramps has positioned the business for growth.

Management believes that further investment into technology, like the Megaport Cloud Router, provides the company with an opportunity to build on the strong momentum to further leverage the Megaport platform in key markets and drive increased adoption of cloud connectivity services.

Other capital raisings.

It isn’t just Megaport raising funds today. The Bubs Australia Ltd (ASX: BUB) share price is also in a trading halt whilst it undertakes a capital raising.

This may not come as a surprise to many in the market. The infant formula company recently revealed that it was considering an increased marketing spend to support its sales in the key China market.

At the time of writing, Bubs has not yet revealed how much it is seeking to raise nor the price at which it intends to raise the funds.

The post Why Megaport is raising $62 million through an institutional placement appeared first on Motley Fool Australia.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of MEGAPORT FPO. The Motley Fool Australia has recommended BUBS AUST FPO and MEGAPORT FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019