AFR - Report 24th Nov 16. How Nearmap's Macquarie capital...

AFR - Report 24th Nov 16.

How Nearmap's Macquarie capital raising was flummoxed by a crystal ball gazer

Rob Newman, CEO of Nearmap defended handling of $25 million capital raising.
Rob Newman, CEO of Nearmap defended handling of $25 million capital raising. Ross Swanborough
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by Tony Boyd
Whoever started Monday's rumour that fast growing tech company Nearmap was raising capital through Macquarie Capital must have an amazing crystal ball.
The unknown person was able to predict the future with considerable accuracy. They told others in the market that Nearmap would use Macquarie to raise $25 million in capital to fund its expansion.
This rumour definitely had an impact on the market.
Nearmap shares had fallen by about 5 per cent on Monday when the rumour came to the attention of Chanticleer.
An email to the Nearmap CEO Rob Newman on Monday afternoon by Chanticleer triggered a stock exchange announcement an hour later.
The company told the ASX at 2.47 pm on Monday: "The company continues to evaluate options for raising capital to accelerate its growth plans. Nearmap does not require new capital in order to progress its existing business plan and the company advises that, at this time, no decision with respect to whether to seek further funding (or as to what form it may take) has been made."
The clear message from this announcement was that nothing is happening.
Lo and behold on Wednesday, Nearmap announced that it would conduct a $25 million capital raising underwritten by Macquarie Capital.
There was only a 1¢ difference between the crystal ball prediction circulating on Monday and the reality revealed on Wednesday. The crystal ball said the new stock would be issued at 71¢ a share while the actual cap raising was at 70¢ a share.
The ASX suspended the stock on Wednesday and issued the company with an "aware letter" requesting a detailed explanation of what transpired between Monday and Wednesday.
That suspension was the equivalent of disciplinary action by the ASX against the company.
In its answer to the ASX query published on Thursday, Nearmap said that there were three reasons why it believed that information about its capital raising on Wednesday was still confidential on Monday.
First, Nearmap said there had been no media releases, press articles or public information released to the market which would indicate that NEA was considering undertaking a capital raise.
Second, it said that no confidential soundings had been undertaken by NEA and "as such, no public communication had been made outside NEA's advisers as to the fact that NEA was considering undertaking a capital raise".
Third, "while communications had been received from a third party individual referencing that NEA may be considering undertaking a capital raising, as NEA had not determined the terms of any proposed capital raising, these communications were necessarily incorrect and considered by NEA to be speculation by one individual."
This makes it clear that the ruminations of the person with the crystal ball was made known to the company on Monday morning while the stock was trading into negative territory.
Nearmap said that on the basis of its assessment of what was happening there was no need for any public announcement.
Chanticleer believes that at this point Nearmap had a perfect opportunity to reveal to the market that it was talking to Macquarie about a capital raising.
Instead, it waited until it was approached a second time by the "third party individual" and received an email from Chanticleer asking about the capital raising before releasing its confusing statement to the ASX.
Nearmap believes that its Monday announcement was "the most appropriate approach for ensuring its compliance with obligations under the ASX listing rules".
"A trading halt would not be appropriate given that NEA had not made a decision to undertake any capital raising," the company said.
The company, which was advised by lawyers MinterEllison, believes that to have disclosed more information on Monday would have risked misleading the market.
Newman and a spokesman for Macquarie told The Australian Financial Review that a final decision on the capital raising was not made until a meeting of the Nearmap board of directors on Tuesday night.
Newman defended the company's handling of the capital raising.
There is now an open question as to what the ASX will do next. Will it refer the matter to the Australian Securities and Investments Commission for further action?
Chanticleer would not be surprised if ASIC gets involved considering the stock was trading on the back of what appeared to be well informed rumours for most of the trading day on Monday.
The person with the crystal ball appears to have inadvertently or, possibly deliberately, created an uninformed market in Nearmap shares. Either way it resulted in a messy capital raising that distracted attention from one of the fastest growing tech stocks in small cap land.
The $25 million raised by Nearmap will be used to expand the company's operations in the United States. It provides geospatial map technology for business, enterprises and government.

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