Novatti positions for next phase of growth with marquee $45m capital raise, strategic RKN stake
Link copied to
Strong institutional support shows major investors are committed to the company’s growth strategy.
For payments company Novatti (ASX:NOV), 2021 has been a transformational year as it consolidates its platform model with key growth opportunities across Australia, Asia, and the US.
And in the wake of that strong execution, Novatti received a vote of confidence from large institutional investors as it announced a marquee $45m cap raise to fund its next phase of growth.
The money raised will be deployed to expand Novatti’s existing presence in its core markets, and fund the acquisition of a 19.9% stake in accounting software company Reckon (ASX:RKN).
With the opportunity for long-term growth and a material re-rating of its share price, Novatti said it’s received firm commitments from highly regarded institutional investors to participate in the raise.
As part of the deal, the company will also welcome a number of new investment partners – Australian backers as well as offshore investors – onto its share register.
The funding round will be comprised of a $40m share placement to institutional investors at 55c per share, representing a discount of 14.1% to NOV’s last closing price of 64c.
Eligible shareholders will also be entitled to participate in a share purchase plan to raise another $5m.
Commenting on the raise, Novatti CEO Peter Cook said the company has a strong track record of delivering outsized returns for equity investors.
“For example, since Novatti undertook its last substantial capital raising in the June FY20 quarter, quarterly sales revenue has increased by 33%,” Cook said.
“At the same time, Novatti’s market capitalisation has also increased by more than 200%. This capital raising and strategic acquisition marks another important milestone in Novatti’s journey as we pursue greater growth for our shareholders.”
With its strategic stake in Reckon, Novatti highlighted the opportunity to leverage the strengths of its existing payments platform as part of a combined product offering.
Reckon’s software is used to provide accounting and payroll services, as well as practice management solutions for professional services firms.
The business generates strong cash flows and has consistently paid a dividend to investors. For the financial year ended December 31, 2020, it generated $75.6 million in revenue which flowed through to core earnings of $32.6 million.
To acquire its strategic stake in the business, Novati will buy approximately 22.5m RKN shares at a price of $1 per share.
Cook said the strategic rationale for the Reckon stake was informed by Novatti’s success with its automated billing platform,Emersion, which also launched in the US earlier this year.
“We know that there is a tight synergy between business automation software and payments processing”, Cook said.
“For software clients, this combination drives increasing productivity. And for providers, it drives a strong economic return based on cross selling.”
“We believe Novatti’s strategic investment in Reckon will open up new opportunities to explore synergies and deliver growth in the Novatti business.”
Novatti’s latest deal follows on from a string of success in pursuit of its operational objectives over the last 12 months.
Those include partnerships with global payment leaders including Apple Pay, Google Pay, Samsung Pay, and UnionPay, and its collaboration with Afterpay to issue prepaid Visa cards in New Zealand.
“Today Novatti enters a new, expanded growth phase as we seek to increase our presence in existing markets, enter new markets, and pursue a range of acquisition opportunities,” Cook said.
This article was developed in collaboration with, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.