Yesterday, Speqta announced a direct share issue of SEK55m at SEK4.5 per share, corresponding to a 31% discount to yesterday’s closing price and 26% relative to 5 days VWAP. The share issue causes a dilution of about 33.5%.

While we consider the 31% discount substantial for a direct share issue, with the additional SEK55m, we believe Speqta has enough funds to reach profitability. Thus, although coming at a considerable cost to current shareholders, Speqta has likely secured all the financing it needs, which is a significant advantage, especially in the current market. Also, Speqta was in immediate need of financing, and we believe it is unlikely that an ordinary rights issue would have been a cheaper option. Nevertheless, it would have been a much slower option. Despite the arguably substantial discount of 31%, we still believe it is encouraging to see Speqta successfully executing a direct share issue. From now on, management, the board, and shareholders can focus on the development of the business rather than financing.

While we generally are very sceptical about companies following up large dividends with share issues, it is not the case in Speqta. The large dividends were distributed by Speqta’s previous owners, board, and management before BrightBid made a reverse acquisition of Speqta. Thus, back then, Speqta was another business led by other people.

In conjunction with the direct share issue, Speqta reported a preliminary ARR at the end of February of about SEK65m – roughly aligning with our Q1 forecast of SEK68.2 and implying continuing solid growth.

As a result of the direct share issue, increasing the number of shares, we lower our Base Case to SEK9 (11). While the 35% discount we expected in our Q4 Update was roughly in line with the outcome, the share price was higher back then. Thus, the larger dilution hurts our Base Case. However, with this share issue, the downside risk in Speqta is reduced significantly, and we raise our Bear Case to SEK4 (3). Our Bull Case is reduced from SEK31 to SEK27.