Freelancer Limited (ASX:FLN) has completed a $10 million placement of ordinary shares at $1.40 to global and domestic institutional investors.
Such was the demand for Freelancer shares, the $45 million completed capital raising and share sale by founders was oversUBScribed and introduced a number of new high quality institutional investors to the register.
Freelancer’s original venture capital investor Simon Clausen and Freelancer's founder and CEO Matt Barrie have sold $23 million and $12 million respectively of existing Freelancer shares alongside the placement to institutional investors at the same price of $1.40.
Significantly, the capital raising and sell down has increased the free float to 23%, enhancing share trading liquidity.
Freelancer.com founder and CEO Matt Barrie said: "I am thrilled that Freelancer is continuing to attract high quality institutions to its share register.
"As we continue to rapidly grow the Company, it is important that all shareholders benefit from increased market liquidity and a broadened share register.
"I remain absolutely committed to Freelancer as Chief Executive and a shareholder, but recognise the need to sell a small proportion of my shares to increase the company's free float and trading liquidity.”
UBS AG, Australia Branch and Canaccord Genuity were joint lead managers to the placement and share sale.
This pricing is in line with the 5-day VWAP until and including 31 July 2015.
The capital raised will be re-invested in the business to accelerate organic growth and take advantage of near term growth opportunities, which could include potential bolt-on acquisitions.
The sale of a total of $35 million shares from the share sale represents approximately 10% of Mr Clausen's shareholding in Freelancer prior to the transaction and 4% of Mr Barrie's holding in Freelancer prior to the transaction.
Post transaction Mr Clausen and Mr Barrie will hold 34% and 42% respectively of issued capital in Freelancer.
Matt Barrie said: "The $10 million placement proceeds received by the company will enable us to continue investing in the business to fuel its rapid growth.
"We are also pleased that Freelancer is now generating positive operating cash flows, another milestone in the Company's development.
"The acquisition of Escrow.com is progressing as expected, and we will provide an update to the market upon completion."
Simon Clausen, founding venture capital investor and company director said: "I am happy to support the company's need to increase market liquidity and broaden its shareholder base. As a director and shareholder I look forward to the next stage of growth."
Settlement of the placement and share sale is currently scheduled to take place on Monday 10 August 2015, with allotment and quotation of shares expected to occur on the ASX on Tuesday 11 August 2015.
Upgraded price target
This week, an upgraded research report from Canaccord Genuity placed a price target of $1.75 for Freelancer.
The Canaccord report highlighted:
Freelancer has reported its 1H15 results that again beat our revenue (A$16.7m vs. CGAu est. A$15.9m) and gross profit (A$14.6m vs. CGAu est. A$13.8m) estimates for FLN marketplace business.
This represents the third upgrade to our FY15 estimates in six months for the core marketplace business.
Importantly, the +41% increase in gross profit was impressive as this line item dictates the future growth profile of the business.
A sleek and incrementally improving platform has enabled FLN to emerge as one of the fastest growing technology companies listed on the ASX.
Unlike its early stage peers, FLN continues to experience consistent upgrades to both revenue and gross profit forecasts (+11% since Jul-14).
Further investments in marketing and product initiatives and expanding into new regions/territories should see its "exceptional growth" rate continue in the medium term.
Following positive revisions to our growth estimates, our DCF valuation increases to A$1.75ps (previously A$1.46ps).
FLN reports a 88% gross profit margin, an implied sustainable EBITDA margin of 65%, an incremental ROIC of >30% that by our estimates is likely to drive +35% revenue CAGR for the foreseeable future.
BUY recommendation reiterated.
The oversubscribed capital raising reflects strong demand for Freelancer stock from new domestic and global institutional investors as FLN experiences consistent upgrades to both revenue and gross profit forecasts.
The increase in the company's free float to 23% will materially assist trading liquidity for institutional as well as larger investors.
Freelancer continues to be one of our top stock picks for 2015/16.
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