Earlier today, Kontigo Care announced a directed cash share issue of up to approximately 2.3m shares, potentially diluting non-participating shareholders by 10.4%. The share price of SEK3.25 represents a 1% discount to the 15-day volume-weighted average of SEK 3.25. Kontigo plans to use the net proceeds to accelerate business development and expand its market beyond the Swedish municipal sector, as well as to support the development of its latest private market product, Previct Safety. The issue is directed towards Alexander Stendahl, who is nominated as a new board member, with the extraordinary general meeting scheduled for 28 November.

We argue that the terms of the directed share issue are highly favourable, with a minimal 1% discount. While non-participating shareholders face an approximately 10.4% dilution, we view the directed share issue as preferable to a standard rights issue, which would likely involve higher costs and a larger discount, leading to greater dilution. Notably, the share issue is directed to Alexander Stendahl, a newly nominated board member. In a recent interview, CEO Ulrika Gires highlighted the expertise and value Alexander Stendahl and Olle Qvarnström, the two newly nominated board members, are expected to bring to Kontigo Care (see link below). Following the share issue, Alexander Stendahl will become Kontigo Care’s second-largest shareholder, holding a c9% stake.

We have updated our valuation to account for the dilution resulting from the directed share issue. Our new base case is SEK5.4 (SEK5.8) per share, with bear and bull at SEK1.0 (SEK1.1) and SEK11.1 (SEK12.3).