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  • Early childhood company G8 Education (GEM) has launched a $301 million equity raise
  • The company is tapping institutional and retail investors for the extra cash, with new shares priced at 80 cents each
  • This means roughly 377 million new shares will be offered — increasing G8’s total share issue by 82 per cent
  • The new cash will help keep the company financially healthy as COVID-19 impacts the early childhood education and care sector
  • Shares in G8 last closed for $1.08 each on April 2 and are expected to come out of voluntary suspension next week

Early childhood specialist G8 Education (GEM) is tapping investors and institutions for $301 million to stay financially healthy during the COVID-19 pandemic.

The extra cash will be raised in two parts — $134 million from an institutional placement, and the remaining $167 million in a one-for-2.2 entitlement offer.

However, any retail investors wanting to top up their G8 interest will need to act quickly; of the $167 million entitlement offer, only $79 million will be offered to retail investors with the rest also heading the way of institutions.

The new shares under the placement and entitlement offer will be priced at 80 cents each — a nice 25.9 per cent discount to G8’s last closing price of $1.08.

Perhaps of the biggest concern for shareholders, however, is the heavy dilution taking place as a result of the capital raise. To raise the $301 million, G8 will be issuing roughly 377 million new shares.

With roughly 460 million currently-issued shares, this means G8 will be increasing its total number of shares on the market by 82 per cent.

On top of this, G8 has suspended all dividends except for its deferred end-of-year dividend from 2019, which will still be paid out in October 2020.

Cash cushion

G8 told shareholders it expects trading conditions to be impacted by the coronavirus for the next six months.

Already, COVID-19 has struck a blow to the early education sector and G8’s operations as children across the country are kept home.

In response, G8 is managing its wages and spending to keep as much cash on hand as possible. Company directors will have their annual paychecks cut but 20 per cent until the end of September.

However, with the newly-announced JobKeeper package and the Early Childhood Education and Care Relief Package (ECECRP) from the Federal Government, G8 will be able to keep its centres open to keep supporting families and employees.

The ECECRP, in particular, will increase the number of children in early childhood care as parents’ fees are slashed entirely.

As such, with wages to be paid, children to be cared for, and $301 million extra cash in the bank, G8 said it will be able to manage its business through a “prolonged period of disruption” to the early childhood education and care sector.

G8 is the largest listed childcare provider in Australia, with 475 centres across the country.

G8 shares have been voluntarily suspended since April 2 as the company assesses its financials. Shares are set to resume trade on Tuesday, April 14, and last closed worth $1.08 each.

GEM by the numbers
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