A new growth fund was announced to align with Seek’s growth vision.
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The Seek Ltd (ASX: SEK) share price has slipped into the red in early trade. Seek shares are now exchanging hands at $29.07 apiece, a 3.1% drop from the open.
Earlier, the digital job advertising company released the outcomes of its strategic review into its Asia Pacific & Americas (AP&A) and Investments businesses.
The share price dip comes on the back of Seek’s announcement to the market before the open.
Quickly adding some colour
To quickly recap, the purpose of Seek’s strategic review was to “provide greater independence” to its AP&A and Investments businesses.
Seek announced back in February that it has a two-pronged strategy.
The first aim, regarding AP&A, is to “focus on growth opportunities” while concurrently “retaining exposure to Investments”.
Secondly, Seek wants its Investments business to operate “independently and access third party capital”. Ultimately, the company’s strategic play permeates the Investments arm as an “investor and business builder”.
As such, the company created an independent unit trust, known as the SEEK Growth Fund, to achieve these primary goals of independence and access to capital.
What did Seek announce today?
Seek confirmed the creation of the Fund, in addition to the particulars around its operations as a going concern.
Firstly, Seek will transfer its holdings in online education services and “14 early-stage ventures” as seed assets in exchange for units in the Fund.
The exchange will occur at “an independently assessed” fair value of $1.215 billion.
In addition, the new firm will be headed by Seek co-founder Andrew Bassat who will remain independent and act autonomously of Seek.
Moreover, the fund has secured a further $460 million capital raise to “fund future investments”, as per the company’s announcement. The breakdown includes a $260 million round from investors with the remaining $200 million coming from Seek directly.
As a result of the changes, Seek’s FY21 and FY20 results will show adjustments to recognise the divested assets as “discontinued operations” for accounting purposes.
Seek will now recognise revenue from the two entities in a single ledger on its consolidated income statement instead.
Speaking on the release, Seek chair Graham Goldsmith said:
As an independent entity, the Fund can make the long-term investment decisions required to build large and sustainable businesses. With greater access to capital, the team can support the existing portfolio and make new investments in the human capital management sector. SEEK is pleased to retain all of its existing economic exposure to these high growth businesses.
Seek share price snapshot
The Seek share price has posted a year to date return of 1.65%, extending the previous 12 months’ gain of 35%.
Whilst it has lagged the S&P/ASX 200 Index (ASX: XJO) this year to date, Seek shares have outpaced the broad index’s return of around 25% over the past year.
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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended SEEK Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.