It’s not a capital raise, it’s a sale offer

As the IPO market heats up, so does the shenanigans of the offer details.

Cleanspace’s (CSX.AX) recent prospectus has a sense of artfulness.

The company ‘offered’ $131 million, of which $111 million is sent to ‘existing shareholders’. (see: use demand from IPO subscribers to soak up the selling).

This only leaves $20 million for corporate use.

But the brokers promoting the IPO receive $5 million and a further $5 million is being used to pay back a loan. Deduct a few more professional services fees and the IPO hasn’t really raised much at all for the company’s operating purposes.

And ‘existing shareholders’ with remaining holdings entered into a ‘voluntary escrow’, which is quite standard although hardly a commitment when 25% of the shares are able to hit the market in 4 months time and another 44% of the escrowed stock free up 10 months from now (August 2021), which will likely be before the 2021 full year results are released.

(the FY20 annual report was signed off August 27, 2020)

I may ask what is wrong with the picture?
and suggest to read your prospectuses !

For now, all seems to be fine 🤷🏻‍♂️

With an IPO price of $4.41, CSX traded to a high of $7.44 on its public debut.

November 2, 2020
by Rob Zdravevski
rob@karriasset.com.au