Freedom Foods’ recovery faces a bigger hurdle after the shares plunged more than 80% as a nine-month trading suspension ended on Monday following last Friday’s news of a $265 million funding proposal.
Freedom Foods investors bailed out in a rather inglorious way on Monday after trading resumed in the company on the ASX. At one stage the shares were down 94% to 18 cents.
More than 172 million shares were traded and, while that is enormous, it has to be remembered that there is a positive message as well, with buyers punting on a rebound in the company’s fortunes.
Shares in the maker of UHT milk and plant-based drinks fell 82.4% to just 53 cents, shrinking its market value to about $146 million, from $834 million, when it last traded on June 24 at $3.01 a share.
After seeing the big sell off small shareholders will find it tough to get to play a part in the recapitalisation of the company and it looks like the Perich family, large institutional investors, and two big banks will end up doing the financial heavy lifting.
The collapse was expected after the company racked up big losses and then spent months negotiating a bailout involving the controlling Perich family of Sydney.
A year ago freedom Foods shares peaked at $5 a share – the fall to $3.10 in June was due to growing worries about unsold stocks and dud accounting oversights, which provided to be right.
The company’s capital raising asks eligible investors to participate in a wholesale investor offer of up to $130 million of notes and a placement of up to $200 million of notes to its largest shareholder Arrovest.
Arrovest will scale back its investment to a minimum of $135 million depending on the level of participation under the wholesale investor offer.
These funds are being raised at $1.00 for each note.
Subject to shareholder approvals, these notes can convert into shares at any time at a Noteholder’s election. However, notes will be mandatorily converted where 75% or more of note-holders have elected to convert.
The proceeds will be used repay between $183 million to $233 million of the company’s existing debt to the NAB and JSBC which will then provide a $50 million revolving credit line (That’s a line of credit that can be drawn down and repaid at will).
