Spacetalk’s Debt Conversion and Dilution Risk Loom Ahead of Shareholder Vote

Capital Raise and Debt Conversion

Spacetalk Ltd (ASX, SPA), a leader in safety-focused wearable technology, has secured a significant capital injection to support its growth ambitions. The company’s largest shareholder, Thorney Investment Group, has committed $3 million through the issuance of unsecured convertible notes. Concurrently, Spacetalk’s secured lender, Pure Asset Management, has agreed to convert $1 million of existing secured debt into similar notes, easing the company’s immediate debt servicing obligations.

This dual funding approach not only injects fresh capital but also restructures Spacetalk’s debt profile. Pure has agreed to suspend loan repayments until the end of 2025 and extend the loan maturity date by three months to June 2027, providing the company with breathing room to execute its strategic plans.

Terms and Shareholder Considerations

The convertible notes carry a 10% annual interest rate, payable quarterly in shares, pending shareholder approval. The notes will mandatorily convert into ordinary shares by July 31, 2026, at a conversion price designed to protect existing shareholders from immediate dilution. However, the conversion will increase Thorney’s voting power beyond 20%, triggering regulatory requirements including an independent expert’s report and shareholder approval to ensure fairness to non-associated shareholders.

Spacetalk’s CEO, Simon Crowther, emphasised that this funding arrangement reflects strong confidence from key investors and lenders in the company’s strategy. He highlighted that the structure balances growth funding with shareholder protection, a critical consideration in the current capital markets environment.

Strategic Use of Funds

The capital raised will be deployed to accelerate Spacetalk’s international expansion, develop a new app ecosystem, and design innovative hardware products. These initiatives align with the company’s mission to provide safety technology solutions across life stages, leveraging its established position in the Australian kids’ smartwatch market.

Thorney’s Executive Chairman, Alex Waislitz OAM, reiterated the group’s long-term commitment to Spacetalk, praising the leadership team’s progress and expressing optimism about the company’s evolution. The backing from both equity and debt holders underscores a shared belief in Spacetalk’s growth potential despite the competitive technology landscape.

Looking Ahead

While the funding and debt restructuring provide a solid platform, the company’s next steps hinge on shareholder approvals and regulatory clearances. The forthcoming shareholder meeting and independent expert’s report will be pivotal in determining the final structure and impact of the convertible notes issuance.

Investors will be watching closely to see how Spacetalk balances growth ambitions with capital structure management, especially as it navigates international markets and product innovation challenges.