Purple Group Channel and Rights Offer not working right now

19 thg 6, 2023

There has been a strong downtrend channel with Purple Group.

And if we follow the movement the next price target is to 75 cents...

No matter what the company does the price continues to drop.

It might be because it is a Penny Stock which is never seemed deemed as valuable to shareholders as blue chips.

There may be hidden issues within the books, micro and macro economics - which may soon be revealed.

And the Rights Offer that took place has lead to the company losing over 450 million.

Let's explain what happened...

PURPLE GROUP'S RIGHTS OFFER

A rights offer, or rights issue, is a method by which a company can raise additional capital from existing shareholders.

When a company decides to conduct a rights issue, it offers shareholders the opportunity to purchase additional shares, usually at a discount, in proportion to the number of shares they already own.

Purple Group decided to raise money by offering existing shareholders the chance to buy more shares at a lower price than they were trading on the market. This is called a rights issue.

When they first announced this plan, the shares were worth R1.29 each. But the new shares were being offered at a cheaper price, 81 cents each. They hoped to raise R105 million this way.

In theory, the value of the company (called the market cap) should have gone up by the same amount - from R1.64 billion to R1.74 billion. This is because the company now had more money and the same amount of shares.

However, instead of going up, the company's market cap fell to R1.29 billion. This means the value of all Purple Group's shares on the market together was R450 million less than before the rights issue. That's over four times more than they raised.

The current share price is R0.90, which is less than the price when they announced the rights issue. So, people who bought the extra shares have lost money.

Now, the shareholders are hoping that the company can use the R105 million it raised to increase profits and push up the share price.
The CEO of Purple Group, Charles Savage, seems confident, stating that they have achieved a return of over 1,000% on a previous capital raise of R100 million. But only time will tell if they can repeat this success.