Is the SPP about to push the SP off a cliff???, page-109

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ADVANCED ANALYSIS
MOMENTUM
AUSTRALIA
Afterpay Touch (APT:ASX)
10 Dec 2019

Here we give some suggestions regarding the Afterpay Share Purchase Plan...
APT, a current holding in the Momentum Strategy, is a stock that we have discussed on numerous occasions in recent years and for the large part have expressed a very bullish long-term view on the stock. Outside of buying the stock as part of the Momentum Strategy, we are aware a number of members have bought the stock on the back of our fundamental analysis of the stock and therefore the company’s announcement regarding its delayed Share Purchase Plan (SPP) would be relevant.

As a bit of background, earlier this year APT conducted an institutional placement and SPP to raise capital for general growth purposes. Between the institutional raising and the SPP, the AUSTRAC inquiries were made public and APT took the prudent course of action and deferred the SPP until the AUSTRAC issues were addressed. As this is now largely in the rear-view mirror, APT is conducting the SPP now for those shareholders that were eligible by holding the stock on 5 June.

Those shareholders have been fortunate as APT has enjoyed a fantastic run as the company has continued to blow away expectations, growing its customer base very rapidly in its three major markets of Australia/NZ, the USA and the UK. The stock is today trading at $29.70 which represents a 29% premium to the SPP price. The one negative of this is that we will likely see a decent scale back but hopefully the delay of the SPP has taken it off shareholders’ radars and we get a decent chunk of the maximum $15k allowed. The SPP is open until 17 January so there is no rush to apply, but with the stock so far ahead of the SPP price one option available to shareholders – especially those comfortable with the size of their holdings or without enough cash to apply for the full $15k – is to sell some stock now and use the proceeds to apply through the SPP.

As this is not part of the Momentum Strategy it is not an official recommendation and members who are eligible will need to decide on a course of action, but with such an arbitrage on offer it should not be ignored.