Carsales is planning to expand into the US - but needs help from shareholders to do it.
👉 Background: Carsales.com.au is an online marketplace for cars, motorbikes and boats. It launched back in 1997 and it has since made a few acquisitions to broaden its biz - around eight since its inception.
👉 What happened: Now the company’s looking to expand into the US with Trader Interactive - a commercial truck and RV listing business. Carsales already owns 49% of the company, so it's looking to get the remaining 51%.
👉 What else: To do it, Carsales needs nearly $1.2 billion - and it’s asking its shareholders for the cash via an entitlement offer.
💡An entitlement offer - also called a rights issue - is when a company offers existing shareholders a deal to buy new shares at a set price in a specific time period.
💡However, that shareholder can’t transfer that offer to someone else - it's a use it or lose it sitch! This tactic is used by companies trying to raise new capital (like Carsales), but who also want to reduce the risks associated with share dilution.
💡If existing shareholders choose to reject the offer, then the company can choose to issue the new shares to the general public. Buuut Carsales has driven down this entitlements offer road before - and around 83% of eligible shareholders took up the offer. So it's looking positive for this growing crew!
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