L1 Group’s $330 Million Equity Raise Priced at $0.95 per Share

Equity Raising Overview

L1 Group Limited (ASX, L1G) has unveiled a significant $330 million equity raising, comprising a $286 million institutional placement and a $25 million share purchase plan (SPP). This capital injection is designed to underpin the company’s ambitious growth agenda following its recent merger with Platinum Asset Management, now operating under the L1 Group banner.

Alongside the equity raising, a subsidiary of L1 Group will sell $19 million worth of existing shares, a move aimed at streamlining the shareholder base post-merger. The placement shares and those offered under the SPP will be priced at $0.95 each, reflecting a discount of approximately 7.8% to the last closing price and 8.5% to the recent volume-weighted average price.

Strategic Use of Proceeds

The proceeds will primarily fund co-investments in L1 Capital’s new Global Long Short strategy, which has already demonstrated strong performance with over 40% net returns year-to-date. Approximately $100 million of the raised capital is earmarked for this strategy, which has recently been made available to wholesale clients through a Cayman Islands domiciled fund.

Beyond this, the capital will support the launch of another new investment strategy leveraging L1 Group’s existing team and scale. The company also plans to accelerate expansion through new affiliates and joint ventures, building on a track record of successful partnerships that have contributed to a 30% annual growth in funds under management since 2014.

Growth and Acquisition Opportunities

L1 Group is actively exploring value-accretive acquisitions that complement its existing platform. The equity raising provides the balance sheet flexibility to pursue these opportunities, which could further diversify and strengthen its investment offerings.

Notably, the founders of L1 Capital have chosen not to participate in the equity raising, a decision that is expected to enhance liquidity and increase the free float of L1 Group shares. Post-placement, escrowed shareholders will hold around 65% of the company, positioning L1 Group for potential inclusion in the S&P/ASX 300 index.

Market and Investor Reception

Institutional investors have shown strong support, with $190 million in pre-commitments already secured, including a significant $80 million commitment from MFF Capital Investments. Gerald Stack, Head of Investment Management at MFF, praised L1 Capital as a high-quality, scalable business with substantial growth potential.

The share purchase plan will open to eligible shareholders in Australia and New Zealand in early November, allowing retail investors to participate in the company’s growth story at the same discounted price as institutional investors.

Risks and Considerations

While the equity raising positions L1 Group for accelerated growth, the company has outlined several risks including market volatility, integration challenges from the recent merger, competition in the asset management sector, and the inherent uncertainties of investment performance. Investors should weigh these factors alongside the company’s growth prospects.