Readcloud shares up ~140pc in FY21 amid edtech tailwinds

Shares in ReadCloud (ASX:RCL) rose this morning after US investment firm Kinderhook increased its stake in the company.

RCL’s ~15pc gain saw it stand out in morning trade, in what’s looking like a quiet Friday session of the back of the Thanksgiving holiday in the US overnight.

Shares in the company have more than doubled so far in FY21, after opening on July 1 at 28c:

Strong momentum

Kinderhook’s investment was announced to the market because it’s now become a substantial holder in RCL, with 9,889,488 shares equivalent to an 8.46pc stake.

Kinderhook increased its position in RCL by acquiring an additional 5.3m ordinary shares for a cash consideration of $1.59, which gives an indicative price of 30c per share — a material discount to the current market price.

In its 4C filing for the September quarter, RCL said it had 14.8 million ASX-listed RCLO options on issue, “exercisable at 30c each and expiring on 30 November 2020”.

ReadCloud’s core product is its interactive eReader software that allows teachers and students to comment directly inside eBooks with text or video.

As an electronic learning platform, ReadCloud is one of a number of educational technology (edtech) companies for which investors have assessed tailwinds in the wake of the learning restrictions imposed by COVID-19.

The company’s 4C filing for the September quarter said it now has more than 500 schools on the platform across Australia.

Shares in RCL have risen steadily throughout FY21, leaving it one of the best performing stocks in the space heading into the end of the year.

The company said its revenue results are highly seasonal, skewed towards the March and June quarters. Over those two quarters in 2020 RCL booked around $5m in revenue, up from $3.5m in 2019.

Cash receipts from customers in the September quarter were $300,000.