Here’s why Rural Funds is ending the week in the red…
The post Why the Rural Funds (ASX:RFF) share price is down 4% appeared first on The Motley Fool Australia. –
The Rural Funds Group (ASX: RFF) share price has returned from its trading halt and is tumbling lower.
At the time of writing, the agricultural-focused property company’s shares are down 4% to $2.50.
Why was the Rural Funds share price halted?
The Rural Funds share price was halted on Thursday so that the company could undertake the institutional component of its fully underwritten 1 for 8.4 accelerated pro-rata non-renounceable entitlement offer.
This morning the company announced the successful completion of the institutional entitlement offer, raising $30 million at $2.47 per new share. This represents a 5% discount to the Rural Funds share price prior to the halt.
Rural Funds will now push ahead with the retail component of the entitlement offer, which is aiming to raise a further approximately $70 million. This takes the total size of the entitlement offer to approximately $100 million. These funds will be raised at the same price as the institutional component of the offer.
Why is Rural Funds raising funds?
Rural Funds advised that it is raising these funds to provide capital for a number of activities. This includes the development of 1,000 hectares of macadamia orchards, the acquisition of cattle properties to be leased to corporate lessees, and the acquisition of up to 8,338 ML of water entitlements for $38.4 million. The latter will be leased to a private farming company for five years.
Management certainly appears confident that these activities will create value for shareholders. So much so, it is putting its money where its mouth is.
Managing Director David Bryant collectively holds approximately 4.5% of the existing units in Rural Funds and has committed to take up a minimum of $1.5 million from the equity raising.
In addition, Chairman Guy Paynter and Director’s Michael Carroll and Julian Widdup hold 0.6% of existing units and have committed to take up their entitlement in full, amounting to approximately $0.6 million.
Should you invest $1,000 in Rural Funds right now?
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Motley Fool contributor James Mickleboro has no position 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 owns shares of and has recommended RURALFUNDS STAPLED. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.