You wouldn’t know unless you read the prospectus.

Latitude (LFS.AX) ‘raised’ $150 million and priced the IPO at $2.60 meaning 57.7 million shares were being offered to subscribers.

All of the $150 million raised was for the benefit of ‘selling shareholders’.

Not a single dollar went to the company for ‘general corporate purposes’.

On its first day of trading, some 5.15 million shares were traded. In other words, 9% of the newly offered stock was mobilised.

I will now speculate on the next piece of the publicly listed strategy.

Keep the new investors updated with corporate prospects,

this in turn convinces them to hold their shares,

which means there is scarcity as less shares are being traded,

the investing public ‘bid’ up the stock on said future prospects,

the price is ‘bid’ higher due to scarcity of sellers,

the stock has now risen 20% above its IPO price,

the company could use some cash so it decides to raise capital,

(because it forgot to do so in the IPO?),

albeit the new share will be offered 7% cheaper than the price investors bought on the day prior to the capital raise announcement.

It’s just how it’s often done.

p.s. the length of escrows for some of the founding shareholders isn’t too onerous.

April 20, 2021

by Rob Zdravevski

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