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Today we have news from:


PCF (LON:PCF)

  • Share price: 31p (-14%)
  • No. of shares: 214 million
  • Market cap: £66 million (pre-Placing)

Proposed Placing to Raise Minimum of £10 million

(Please note that at the time of publication, I have a long position in PCF.)

This online bank and lender announces that it is raising funds at 30p. I have mixed views.

Current Trading & Outlook

The announcement includes a trading update which confirms that progress is in line with expectations.

By December 2018, PCF had grown its lending portfolio to £250 million, with the help of an acquisition.

It is targeting new business originations of £250 million in the current financial year, and is ahead of target to reach a total lending portfolio of £350 million and return on equity (ROE) of 12.5%.

It continues to target a portfolio of £750 million and ROE of 15% by September 2022.

Placing

This size of the Placing is fine: £10 million. Depending on costs, this could increases the book equity of the business by c. 22% (NAV was £42.6 million at September 2018).

While I'm less excited by the company's acquisition strategy than I am by its organic growth prospects, I don't mind if it raises fresh funds to accelerate growth. That was always likely, to enable it to get to the £750 million portfolio target.

It's just slightly disappointing that Somers (the 65% shareholder) didn't want to put money in at a higher level.

NAV per share was c. 20p as of September 2018, so Somers is paying a 50% premium to that.

The share price, on the other hand, was at an 80% premium to NAV p.s. as of last night.

The practical consequence in terms of dilution is that 33.3 million new shares will be issued for a £10 million placing, instead of 27.8 million. The total share count will be 247.5 million, instead of 242 million.

When you look at it this way, the difference in NAV…

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