Why is the Sovereign Cloud (ASX:SOV) share floating 27% higher today?

Investors are rallying up the company's share price.

| More on:
A woman wearing a red jumper leaps into the air with sky behind her and earth beneath her.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Sovereign Cloud Holdings Ltd (ASX: SOV) share price has returned to trading following the company's completed placement and institutional entitlement offer.

At the time of writing, the infrastructure-as-a-service (IaaS) company's shares are fetching for 77.5 cents, up a sizeable 27.05%.

Sovereign Cloud share price resumes

It's been a strong day for the Sovereign Cloud share price, with investors buying up amid the company's successful equity raise.

In a statement to the ASX, Sovereign Cloud advised it has raised gross proceeds of approximately $35 million. This consists of a placement to data centre operator, Nextdc Ltd (ASX: NXT) and the accelerated institutional component.

The placement saw 24.9 million shares issued to Nextdc at a price of 50 cents per share, raising $12.4 million. This was completed Monday 22 November and gives Nextdc a 19.99% controlling interest in AUCloud.

On the other hand, the institutional component raised roughly $4 million at the same price. This comprises a 4 for 11 fully-underwritten accelerated pro-rata non-renounceable entitlement offer. In turn, around 8 million new ordinary shares are to be issued by the company on 30 November.

A retail entitlement component is also expected to be raised, allowing everyday shareholders to take part in the offer. Approximately a further $18.6 million (before costs) is projected to be added to the Sovereign Cloud's equity raise.

The proceeds will be used towards investing in customer growth, scaling AUCloud, and the research and development of new features. The platform will also be rolled out to Brisbane, Melbourne, and Adelaide. This is expected to complement the new cloud platform's existing presence in Sydney and Canberra.

Furthermore, Sovereign Cloud will spend more than half of its funds on working capital requirements during the period.

AUCloud currently has 48 employees located in Canberra, Brisbane and Sydney. The company's resources are forecast to expand over the next 2 years to support revenue growth in Canberra and Sydney.

About the Sovereign Cloud share price

Over the past 12 months, Sovereign Cloud shares have moved in circles, particularly in the second half of 2021. The company's share price is down 30% since this time last year, and hovering around 25% below year to date.

Sovereign Cloud presides a market capitalisation of about $40.67 million, with more than 52.48 million shares on its books.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Technology Shares

A human-like robot checks out market performance on a laptop, indicating the rise of AI shares.
Technology Shares

3 top performing ASX AI shares for your watchlist

Have you positioned your portfolio to capitalise on the next tech revolution?

Read more »

Two IT professionals walk along a wall of mainframes in a data centre discussing various things
AI Stocks

3 reasons to buy NextDC shares today

A leading expert forecasts more growth to come for NextDC's rebounding shares.

Read more »

A share market analyst looks at his computer screen in front of him showing ASX share price movements
Technology Shares

Why this $3.9 billion acquisition makes Xero shares a buy today

A leading expert forecasts that Xero’s $3.9 billion investment is about to pay off.

Read more »

Three young people in business attire sit around a desk and discuss.
Small Cap Shares

Tiny tech: 3 ASX small-cap shares with new ratings

Toby Grimm of Baker Young and Peter Day of Sequoia Wealth Management share their new ratings.

Read more »

Smiling young parents with their daughter dream of success.
Technology Shares

Could Life360 shares rise to $37.50?

Bell Potter has given its verdict on this tech stock.

Read more »

Man smiling at a laptop because of a rising share price.
Technology Shares

Investors should put these 2 top ASX tech shares on the watchlist

Looking for growth? These two stocks are delivering.

Read more »

two computer geeks sit across from each other with their laptop computers touching as they look confused and confounded by what they are seeing on their screens.
Share Gainers

ASX tech shares outperformed US tech stocks by 2:1 in FY25. Here's why

Forget the Magnificent 7! Aussie tech shares had twice as much price growth as US tech stocks in FY25.

Read more »

A person sitting at a desk smiling and looking at a computer.
Technology Shares

3 ASX 200 tech shares to buy in July: Experts

The ASX tech sector delivered outstanding returns for investors in FY25.

Read more »