This report is prepared for the Warsaw Stock Exchange SA within the framework of the Analytical Coverage Support Program 3.0.
Event: Issue of maximum 274,082 shares at PLN 155 per share.
After yesterday’s market close, the Company disclosed the delayed confidential information about conducting negotiations regarding the participation of selected institutional investors in the private subscription of shares issued within the limits of the authorized capital addressed to fewer than 150 natural or legal persons, excluding pre-emptive rights of the existing shareholders.
DataWalk completed negotiations and the management adopted a resolution regarding the issuance of maximum 274,082 series P bearer shares (5.6% of the current share capital) with a price at PLN 155 per share (11% discount vs yesterday’s market close). The process of signing share subscription agreements will end on August 14, 2022.
Expected impact: The issue price is 11% lower than yesterday’s market close, therefore, one may expect the negative reaction of investors at first, albeit in our view the transaction is positive as we believe it offsets the risk related to a lack of funding opportunities in the current unfavorable market conditions. According to our estimates, to continue optimal development, the Company would have to acquire additional financing in the middle of next year at the latest. Nevertheless, given extremely unfavorable macroeconomic conditions and negative market sentiment, especially towards growth companies, it looked like a truly difficult task to obtain funding at the fair valuation. With the lack of additional funding,
DataWalk may face the risk of controlled deceleration of the Company’s development by way of slowing down the pace of employment of new implementation and sales teams. It looks like this risk weighed heavily on the Company’s market price recently.
In our view, the financing round announced yesterday (max PLN 42.5 million) will allow the Company to continue optimal development over the next 2 years (till mid-2024); besides, the Company managed to offset the risk stemming from the potential failure of raising further funding in this hostile market environment, and we also like the fact that despite this environment (plunging the peers’ valuation multiples, strong increase of the RFR), the issue share price was set on the symbolically higher level than in the previous round of financing (Sept. 2020).
All in all, the first reaction of investors may be negative, but in the medium and long term the new share issue materially lowers the Company’soperating risk.
Analyst:Tomasz Rodak, CFA
