WAM Microcap to raise $75m for "undervalued growth opportunities"

The listed investment company's (LIC) performance was marginally below the index in the December half, but for the full-year it outperformed by 3.3 percentage points with the portfolio rising by 11.1 per cent.

Three months later the annual growth of the portfolio stood at more than a quarter by 31 March 2024, compared to growth of 11.9 per cent for the comparable index.

WMI's two largest holdings by the end of 2023, telco investment vehicle Tuas Holdings (ASX: TUA) and aged care provider Regis Healthcare (ASX: REG), have risen in value by 165 per cent and 90 per cent respectively over the past 12 months.

Meanwhile, in February its outperformance was partly driven by its holdings in software acquisition target Ansarada Group (ASX: AND) and dropshipping online luxury fashion retailer Cettire (ASX: CTT), which despite scrutiny over its business model and duty payment concerns is still up 137 per cent over the year.

In a February update, WMI's lead portfolio manager Oscar Oberg predicted a more positive environment ahead for micro-cap companies, with "valuations at decade lows and the likelihood of additional mergers and acquisition activity".

Now the group seeks to act further on that thesis, noting the sector is "exhibiting signs of outperformance as company valuations improve following a period where large-cap companies have outperformed their smaller peers".

WMI also emphasises it has the capacity to raise $138.9 million but is opting to just raise $75 million through a share purchase plan (SPP) and placement, ensuring the capital is deployed "into the most compelling opportunities". The amount is less than the $88 million raised in a heavily oversubscribed round in 2020.

The funds will be raised at a price of $1.455 per share, which is equivalent to the company's pre-tax net tangible asset (NTA) backing but is at a 4.3 per cent discount to its closing price before the Easter long weekend. 

"We believe micro-cap companies are poised for recovery following the 2022 market sell-off and are optimistic for the year ahead," says Oberg.

"We are seeing the most compelling opportunities to deploy capital since the coronavirus pandemic and believe there will be an increase in capital markets activity in the next 12 months."

Chairman Geoff Wilson AO says the investment team has diligently constructed the investment portfolio, resulting in strong investment portfolio performance and total shareholder return since inception.

"The company’s share price has been trading at an average premium to NTA of 14.7 per cent following the last SPP and placement in September 2020 and we are pleased to provide our existing WAM Microcap shareholders the opportunity to increase their holdings at NTA and invest in a portfolio of quality Australian micro-cap companies," he says.

"We greatly appreciate the trust, loyalty and support our shareholders have shown us since inception."