- Cirralto (CRO) dipped in early trade today after having to answer a string of ASX queries about its recently-announced $18 million capital raise
- The capital raise was announced earlier this month, with Cirralto planning to raise the funds from institutional and sophisticated investors
- However, it seems the market operator had some questions about if Cirralto followed all necessary listing rules when planning the raise
- Cirralto admitted it decided to take advantage of its suddenly-surging share price to plan the significant raise
- In fact, institutions and sophisticated investors approached Kaai Capital, the lead manager to the raise, before Cirralto ever thought about raising funds
- While the ASX seemed concerned that Cirralto did not disclose the raise to the market when it should have, it seems the company's response to the ASX queries today have satisfied the market operator
- Shares in Cirralto are trading grey at 11 cents per share this morning
Cirralto (CRO) dipped in early trade today after having to answer a string of ASX queries about its recently-announced $18-million capital raise.
Cirralto announced the details of the raise earlier this month under which it plans to place 200 million shares to institutional and sophisticated investors at 9 cents per share.
This is a 6 per cent premium to the company's 20-day volume-weighted average price.
While the ASX did not suspend CRO shares or take any action against the fintech business, it seems the market regulator wanted some clarification about the nature of the capital raise, why Cirralto decided to raise the funds, and if it disclosed the information to the market within a reasonable time frame.
Capitalising on rising shares
First and foremost, Cirralto admitted it took advantage of its surging share price to raise some fresh funds at a premium price.
Shares in CRO had been trading for around 6 to 7 cents each from mid-January to mid-February, but suddenly spiked to an intra-day high of 21 cents on February 16. While Cirralto has since pared back the win, the company has continued to trade above 10 cents per share.
When asked about the unexplained spike, Cirralto pointed to the payment and merchant services sector as a whole, with the likes of Zip Co (Z1P) and Openpay (OPY) also seeing increased trading action over this period.
Nevertheless, Cirralto management said it was never the company's idea to raise the extra funds in the first place; allegedly, institutional and sophisticated investors approached Kaai Capital about investing more into Cirralto.
Kaai Capital, who managed Cirralto's last capital raise, then approached company CEO and Managing Director Adrian Floate about taking on a capital raise. This was on February 16.
"Prior to this unsolicited phone call, the company had no plans of conducting a capital raising," Cirralto told the ASX.
The next day, Cirralto's board of directors and management team discussed the capital raise in more detail, and the $18 million plan was confirmed with Kaai at 10:00 pm on February 17.
Cirralto said while it had not considered a capital raise before this point, it thought raising a significant amount of money while shares were strong could help the company accelerate its growth plans with relatively minimal dilution.
Cirralto flagged the capital raise and called a trading halt before market open on February 18.
Why the queries?
It's not certain why the market operator sought clarification on the raise, but part of the ASX's questions included concerns that Cirralto did not disclose to the market its intention to raise capital as promptly as it could.
Nevertheless, given the capital raise plan was only finalised long after market close on February 17, Cirralto seems certain that it adhered to all necessary listing and disclosure rules when finalising the raise.
Today, Cirralto shares are still trading as per normal and there have been no further ASX queries, suggesting the market operator is satisfied with CRO's responses for now.
While Cirralto shares fell over nine per cent in the first hour of trade, they have since taken back the lost ground to trade grey at 11 cents each at 11:36 am AEDT. The company has a $189 million market cap.