Jatcorp’s new round of funding to accelerate growth

Following the resumption of normal trading today, after imposing a trading halt on Tuesday, Jatcorp’s (ASX: JAT) share price was down -10% at noon.

The market appears to have reacted negatively to this morning’s revelations that the consumer goods developer is raising $4.4m via placement and is securing an additional $3.3m funding facility.

Jatcorp last tapped investors for cash in February when it undertook a $6m share purchase plan.

Funds raised are being earmarked for the repayment of a (circa $5m) Topwei loan, new product development, R&D and working capital.

To the uninitiated, Jatcorp is a leading producer of supplementary food products, and plant-based meat.

The company has positioned itself as a key player in the flourishing Australian consumer goods export industry, offering Chinese retail presence, online sales to Chinese consumers through offshore platforms, and high-volume wholesaling to daigou groups and other distribution channels.

The deal

What may have perturbed the market today is the manner in which funds are being raise, which is via the issue of 275m new fully paid ordinary shares at an issue price of $0.016.

$2.2m of the $4.4m committed was raised from current shareholders and associates of Jatcorp (excluding JAT directors). The remaining $2m has been committed by Gold Brick Capital Pty Ltd, Jatcorp’s largest shareholder.

Following the issue of the placement shares, Gold Brick will take its holding of issued capital to 18% from 14.94%.

Robust growth assumptions

What may have also concerned the market this morning is that the placement appears to be wired to some very robust growth assumptions. For example, investors can expect to receive one free attaching option for every one placement share subscribed.

But the strike price of $0.032 - and expiry date of two years from the date of issue – is close to double what the stock was trading at earlier this morning.

Admittedly, sales revenue for the December 2021 half year of $16m increased compared to the immediately preceding half year ended 30 June 2021 of $7m. But much of revenue kicker is more attributable to a normalisation of trading conditions than organic growth per se.

Pipeline for growth

Today’s funding announcement follows revelations last Friday that the company had entered a deal with Australian natural food manufacturer Sanmik Natural Foods to develop ice cream and yogurt products.

Management expects the milestone deal with Sanmik – which represents a significant extension to Jatcorp’s business – to be one of many agreements the company expects as it capitalises on its growing product offering.

Two hours out from the close today, Jatcorp's share price had regained some lost ground, down -5%.

Jatcorp’s share price over 12 months.