GeoOp shares plunge 23% after discounted rights offer announced

GeoOp's [NZX: GEO] shares dropped 23 percent after the management app developer said it plans to raise $3.6 million in a discounted rights offer.

The NZAX-listed company will issue up to 17.9 million new shares at 20 cents apiece, a 38 percent discount to where the shares traded before the announcement of 32.5 cents. The shares recently traded at 25 cents, matching the record low reached earlier in the year. The stock sold at $1 in its initial public offering in October 2013 and soared as high as $4.49 in November of that year.

In a statement, GeoOp said the rights issue would give the company capital to meet its 2017 business plan and reduce the balances of its existing convertible notes.

"The company requires $2 million in liquid funds to meet its FY17 business plan," it said. "Directors and the company's major shareholder, North Ridge Partners (NRP), have committed to collectively invest $1 million subject to an exemption being granted by the Takeovers Panel in the event this causes NRP and its associates to increase their percentage shareholding, in the rights issue. In addition, NRP and its associates have notified the company that they intend converting, as approved by shareholders, one-third of their convertible notes to ordinary shares at the issue price."

GeoOp flagged when it announced its annual results last month that it would need to raise between $2 and $4 million.

The company narrowed its full-year loss and met guidance for revenue, based on proforma numbers that assume the inclusion of InterfaceIT which it bought in June. The loss was $2.7 million in the 12 months ended June 30, from a loss of $5.8 million in a 15-month period a year earlier, the Auckland-based company said. Sales rose to $1.9 million from $1.2 million.

GeoOp bought InterfaceIT for $9 million in shares and convertible notes, giving the Australian company's owners about 32 percent of the merged entity but rising to as much as 64 percent if certain conditions are met. Pro-forma revenue as if the two companies had operated as a combined entity through 2016 was $4.58 million, just above the projection in an independent assessment of the deal.

The company had cash reserves of about $1.1 million as at June 30 and directors and related parties provided a $425,000 cash injection after balance date "to provide additional liquidity until completion of the forthcoming capital raising".

(BusinessDesk)

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