Locate Technologies Converts Locate2u Royalty Into Equity at Premium
Locate Technologies has agreed to settle its remaining Locate2u revenue royalty by issuing 10 million shares to PURE Asset Management at a significant premium to market price, simplifying funding and improving cash flow.
- 10 million new shares issued to PURE Asset Management
- Royalty converted at implied 6.8 cents per share premium
- Removes 2.5% revenue royalty on Locate2u platform
- Transaction improves cash flow and funding simplicity
- PURE to become substantial shareholder without related party status
Locate2u Royalty Converted Into Equity at Premium
Locate Technologies Limited (NZX:LOC) has struck a deal to convert its remaining revenue royalty on the Locate2u platform into equity, issuing 10 million new ordinary shares to PURE Asset Management. The shares are priced at an implied 6.8 cents each, a notable premium to the recent market price of 4.7 cents, signalling PURE’s confidence in the company’s growth prospects.
Previously, Locate Technologies paid PURE a 2.5% royalty on Locate2u’s monthly revenue, originally capped at A$0.75 million but reduced to A$0.56 million through quarterly payments. This conversion extinguishes that ongoing royalty obligation, effectively removing a claim on future Locate2u revenue and simplifying the company’s funding arrangements.
Funding Simplification and Cashflow Benefits
By turning the royalty into equity, Locate Technologies improves its cash flow profile, freeing up revenue that would otherwise be paid out. CEO Steve Orenstein highlighted that the move “further aligns PURE with our shareholders” and described the transaction as an “excellent outcome for both parties.” The share issue falls within the company’s 15% annual placement capacity under NZX rules, bypassing the need for shareholder approval.
PURE Asset Management, acting as trustee for The Income and Growth Fund, is not a related party, but will become a substantial product holder and is expected to file the required disclosures. This equity conversion aligns PURE’s interests more closely with Locate Technologies’ long-term performance rather than fixed royalty payments.
Strategic Context Amid Growth and AI Integration
Locate Technologies operates two AI-driven platforms: Locate2u, which supports route optimisation and delivery management internationally, and Zoom2u, an on-demand courier marketplace in Australia. The Locate2u platform has been a key growth driver, recently contributing a 42% revenue increase and the company’s first positive EBITDA quarter. This royalty conversion may help accelerate investment and operational flexibility as Locate Technologies pursues further expansion, including a recent three-year contract rollout with FedEx Australia.
Bottom Line?
The royalty-to-equity conversion removes a recurring revenue claim, enhancing cash flow and aligning investor incentives, but watch for PURE’s impact as a new substantial shareholder.
Questions in the middle?
- How will PURE’s new shareholder status influence Locate Technologies’ governance and strategy?
- Will the improved cash flow accelerate growth initiatives on the Locate2u and Zoom2u platforms?
- How might the market respond to the dilution from the 10 million share issue given the premium pricing?
