SINGAPORE (Oct 4): Shares of Trendlines Group, the investor of medical and agricultural technology startups, saw heavy trading on Friday after the group said its current market price "does not properly reflect the company's value".
This was in response to a query by the Singapore Exchange (SGX) asking why the firm had priced the rights shares at 10.5 cents, which is at a 19.3% premium to the counter's last trading price of 8.8 cents on Sept 26.
The regulator also wanted to know why shareholders would subscribe for these shares when they could purchase them from the market at a lower price.
Trendlines was the 10th heaviest traded counter in Friday’s session. Shares in thr group had closed 0.3 cent, or 3.26%, higher at 9.5 cents with 11.2 million units traded. This compared to its 30-day average volume of 1.4 million units.
In a Friday early morning response, Trendlines said the rights share price of 10.5 cents provided a better estimate of the company's value, as this was supported by the July 22 private placement to Librae Holdings, which issued shares at the same price.
The placement price had represented a 34.6% premium over the counter's volume-weighted average price (VWAP) and its last traded price for the full day prior to the subscription agreement.
Despite the current market price being lower than the issue price for the rights issue, Trendlines said the current average trading volume of the company's shares is low and that shareholders who wish to buy its shares might not be able to do so from the open market at the current market price.
Trendlines also explained that Librae had provided an irrevocable undertaking to subscribe for its entitlements and excess rights shares at the same price, following discussions with some of its substantial shareholders, including Librae, who noted the possibility of "negative market perception" in the event of a failed offering.
Among other queries, SGX also asked why Trendlines had to raise more funds through the proposed rights issue in September even though cash and cash equivalents stood at U$8 million ($11 million) based on the group’s HY2019 results announced on Aug 7, and that the group also raised $10.8 million via the recent placement exercise.
See: Trendlines gets $10.9 mil investment; shares open 28% higher
To date, Trendlines said it has not utilised the $10.8 million raised from its August placement, where Librae subscribed for shares at 10.5 cents each, and became a 14.55% shareholder of the company.
According to the filing, the group also has a balance of about $2.4 million from its $19.3 million initial public offering in November 2015, and $5.3 million remaining from its $13.3 million placement in 2017.
"While the company does not have an urgent need to raise funds, it believes that it can put the funds to good use to further build shareholders' value," Trendlines said.
The company noted that the new funds raised will be used for working capital, and investments in its current and new portfolio companies.
See also: Trendlines receives conditional commitments of up to $30.3 mil to drive expansion strategy
