Why is the Carsales share price crashing 15% lower today?

Carsales shares are sinking on Wednesday. Here's why…

| More on:
A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash

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

Key points

  • Carsales shares have returned from a trading halt and sunk deep into the red
  • The auto listings company's shares are falling after it raised $842 million via a capital raising
  • The proceeds will be used to support the acquisition of the remaining 51% of Trader Interactive

The Carsales.Com Ltd (ASX: CAR) share price has returned from its trading halt and dropped deep into the red.

In morning trade, the auto listings company's shares are down by a sizeable 15% to $17.70.

This leaves its shares trading within touching distance of its 52-week low of $17.45.

Why is the Carsales share price sinking?

The Carsales share price is sinking today after the company announced the successful completion of the institutional component of its fully underwritten pro-rata accelerated non-renounceable entitlement offer.

According to the release, the company has raised approximately $842 million at a 14.5% discount of $17.75 per new share. The release notes that the offer was well supported with a take-up of 90% by eligible institutional shareholders.

Carsales will now push ahead with the retail component of the entitlement offer, which is expected to raise approximately $365 million. This will bring the total raised from the offer to approximately $1,207 million.

Why is Carsales raising funds?

The proceeds from the capital raising will be used to acquire the remaining 51% interest in Trader Interactive for US$809 million, or approximately A$1,172 million.

This acquisition price values Trader Interactive on a 100% enterprise value basis at US$1.9 billion or A$2.75 billion.

Management expects the deal to generate highly attractive financial returns for shareholders, with low double-digit earnings per share accretion expected in the first full year of ownership and further upside expected thereafter.

Carsales' CEO, Cameron McIntyre, was pleased with the success of the offer. He commented:

We are very pleased by the support demonstrated by institutional shareholders for the entitlement offer and their endorsement of the acquisition. We look forward to working with the Trader Interactive team to capture growth potential and realise value for our shareholders.

Motley Fool contributor James Mickleboro 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 recommended carsales.com Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Mergers & Acquisitions

Group of people in a gym high five each other surrounded by gym equipment.
Mergers & Acquisitions

This ASX tech stock is hitting a record high on acquisition news

The market is responding positively to this news. Let's dig deeper into it.

Read more »

Two people shaking hands in the boardroom on a merger.
Mergers & Acquisitions

What did Macquarie make of the Brickworks and Soul Patts merger?

Macquarie sees simplification, scale, and upside… but it also has a warning..

Read more »

A cool young man walking in a laneway holding a takeaway coffee in one hand and his phone in the other reacts with surprise as he reads the latest news on his mobile phone
Mergers & Acquisitions

PointsBet share price surges 11% on improved takeover offer

The bidding war for PointsBet shares continues apace today.

Read more »

A couple sit in front of a laptop reading ASX shares news articles and learning about ASX 200 bargain buys
Share Gainers

Why are Soul Patts shares up 9% today?

A marriage proposal has seen investors flock to this company.

Read more »

A young woman holds her hand to her mouth in surprise as she reads something on her laptop.
Mergers & Acquisitions

Why are Brickworks shares up 18% today?

Let's find out what is getting investors excited this morning.

Read more »

Two hands being shaken symbolising a deal.
Mergers & Acquisitions

Soul Patts to merge with Brickworks shares: What does this mean for investors?

These two blue chips are merging as part of a $14 billion deal.

Read more »

The last piece of the jigsaw being fitted, indicating good news for a share price on merger or acquisition
Mergers & Acquisitions

WiseTech share price storms higher on $3.25b blockbuster acquisition

What is the company spending billions on? Let's find out.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Mergers & Acquisitions

IAG share price lifts off on strategic alliance approval

IAG shares are racing higher in Thursday’s sinking market.

Read more »