Dilution and Control Risks Loom as HITIQ Launches Major Capital Raise
HITIQ Limited has announced a non-renounceable entitlement offer to raise up to $2.92 million, supported by partial underwriting from GBA Capital and accompanied by new options issuance. The capital raise aims to fund expansion, product development, and operational growth.
- Non-renounceable entitlement offer at $0.022 per share
- Partial underwriting by GBA Capital Pty Ltd up to $1.2 million
- Issuance of free new options on a 1:2 basis with shares subscribed
- Funds allocated to manufacturing, US expansion, R&D, and marketing
- Potential dilution of up to 25% for non-participating shareholders
Capital Raise Overview
HITIQ Limited, a health technology company listed on the ASX, has launched a non-renounceable entitlement offer to raise up to $2.92 million. Shareholders are invited to subscribe for one new share for every three shares held at an issue price of $0.022 per share. Additionally, for every two shares subscribed, investors will receive one free new option exercisable at $0.022 until December 2028.
The offer is partially underwritten by GBA Capital Pty Ltd, which has committed to underwriting $1.2 million of the raise. This underwriting arrangement is supported by sub-underwriting commitments from several directors, including Executive Chairman Earl Eddings and Non-Executive Directors James Barrie, Matthew Clayworth, and Jennifer Tucker.
Use of Proceeds and Strategic Intent
Proceeds from the entitlement offer and a recent placement totaling approximately $3.6 million will be directed towards key growth initiatives. These include expanding manufacturing capacity, accelerating the company’s US market expansion, enhancing product offerings, and bolstering business development and marketing efforts. A portion of funds will also support ongoing research and development activities and general working capital needs.
The Board has indicated that the funds raised will provide sufficient working capital to meet current commitments and operational objectives. However, should the offer not be fully subscribed, the company may need to scale back some initiatives proportionally.
Impact on Shareholders and Control
Shareholders who do not participate in the entitlement offer face dilution of approximately 25% if the maximum subscription is achieved. The issuance of new options, if exercised, could further dilute holdings by up to 33%. The largest shareholder, Harmil Angel Investments Pty Ltd, currently holds 16.17% but has indicated it will not take up its entitlement. However, its nominated director, Matthew Clayworth, plans to participate fully and sub-underwrite a significant portion of the offer.
Following the offer and pending shareholder approval for certain option issuances, Harmil’s voting power could adjust but is not expected to exceed 19.99%. The company has disclosed potential control implications related to the conversion of Harmil’s convertible notes, which will be addressed at an upcoming general meeting.
Risks and Considerations
The prospectus highlights several risks, including dilution, going concern uncertainties, reliance on key personnel, intellectual property protection, regulatory approvals, and market competition. The company cautions that the investment is highly speculative and that future performance is subject to various external and internal factors.
Investors are advised to carefully consider these risks and consult professional advisers before participating. The offer excludes shareholders with registered addresses outside Australia, New Zealand, Germany, Hong Kong, and Singapore due to regulatory constraints.
Next Steps and Market Implications
The entitlement offer opens on 21 May 2025 and closes on 10 June 2025, with securities expected to commence trading shortly thereafter. Shareholder approval for certain option issuances will be sought at a general meeting scheduled for late June 2025. The market will be watching subscription levels closely, as they will influence HITIQ’s ability to execute its growth strategy and impact share price dynamics.
Bottom Line?
HITIQ’s capital raise sets the stage for expansion but hinges on shareholder participation and approval amid dilution and control considerations.
Questions in the middle?
- Will the entitlement offer achieve full subscription or rely heavily on underwriting?
- How will the conversion of Harmil’s convertible notes affect shareholder control and company strategy?
- What are the prospects for HITIQ’s US expansion and product development with the new capital?
