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Why the Spacetalk (ASX:SPA) share price has exploded 40% in a week

The Spacetalk Ltd (ASX: SPA) share price has exploded 50% in a week. We take a look into what is driving the company’s shares higher.
The post Why the Spacetalk (ASX:SPA) share price has exploded 40% in a week appeared first on The Motley Fool Australia. –

Man looking excitedly at ASX share price gains on computer screen against backdrop of streamers

The Spacetalk Ltd (ASX: SPA) share price has been on fire lately, reaching gains of 40% in the last five trading days. This comes after the company provided the market with two positive updates that lifted its shares to a new 52-week high.

Spacetalk shares were trading for as little as 11 cents before going into a trading halt on 16 March. Today, the technology company’s shares are swapping hands for 15.5 cents, up 6.9% for the day and almost 41% in a week.

Let’s take a look and see what Spacetalk recently announced to the ASX market.

What’s been driving the Spacetalk share price?

New loan facility

According to the first release, Spacetalk advised that PURE Asset Management agreed to provide a $5 million corporate loan facility. The line of credit will give Spacetalk immediate funding to scale up operations to capture new market share.

The terms and conditions attached to the loan facility will see it split into two different tranches. The first will comprise a $3 million term loan with an option requiring the company to issue 11 million shares at 30 cents each. The second is a $2 million bridging facility, available until 31 December 2021. Spacetalk will use the funds to purchase inventory, expand geographically, invest in its brand, and put towards working capital purposes.

PURE director Tim Callan commented:

We are excited about entering into a partnership to support Spacetalk, to further scale its market leading ANZ business and expand globally. Connected smartwatches is the fastest growing market for wearables and is forecast to grow at high double-digit CAGR over the next decade.

Spacetalk benefits from a significant early-mover moat in the connected smartwatches niche for kids and seniors, having built strong brand equity, network effect, and a dominant market share.

Spacetalk CEO Mark Fortunatow added:

It is an extremely exciting time for Spacetalk as our expanded product suite continues to print strong top-line growth. The Company is now looking beyond our category leadership in ANZ to the massive global market opportunity.

While this had a positive impact on the Spacetalk share price, the next announcement pushed its shares even further.

Telstra agreement

In addition to the loan facility, the second announcement on Friday that really boosted the Spacetalk share price involved a deal with Telstra Corporation Ltd (ASX: TLS).

Under the agreement, Telstra will begin selling Spacetalk Adventurer devices across its national retail stores and online channels next month.

The products will be placed on Telstra’s core wearables device range following completion of final device testing and certification. The planned launch is expected to include marketing and public relations activities, influencer activity and other initiatives.

The devices will be available for outright purchase or on a Telstra repayment plan over a 12 or 24-month period.

In addition, the telco giant is working with Spacetalk to develop a monthly SIM service plan for Spacetalk devices. This will enable Telstra to add new mobile service subscribers to their network.

Telstra retail and regional executive Fiona Hayes said of the agreement:

Smartwatches are the fastest growing market for wearables globally and the addition of Spacetalk will strengthen Telstra’s connected smartwatches offering. Spacetalk is a market leader in Australia in connected smartwatches for children and seniors, providing a practical solution for families to stay connected.

Spacetalk CEO Mark Fortunatow continued on:

This is a very strong endorsement of the quality of Spacetalk devices, with Adventurer to be placed on Telstra’s core wearable device range.

… Needless to say, we are extremely excited by the enhanced brand recognition and sales growth we expect from extending our customer reach with Australia’s largest mobile network operator.

The Spacetalk share price has gained more than 100% in the past 12 months.

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Motley Fool contributor Aaron Teboneras owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Spacetalk (ASX:SPA) share price has exploded 40% in a week appeared first on The Motley Fool Australia.

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