PaySauce to raise $5.8m to help push into other markets

PaySauce chief executive Asantha Wijeyeratne. Photo / Supplied

PaySauce plans to raise $5.8 million from a one-for-seven pro-rata renounceable rights offer to help expand its New Zealand presence and its push into other markets.

The payroll software provider is also requiring the convertible notes it issued in June 2019 to convert to shares on Jan. 28 at the rate of 51.5 cents per share, or a total nominal amount of about $1.25m.

The company said the new shares will be priced at 34 cents per share, a 61.5 per cent discount to the theoretical ex-rights price of 88 cents and a 50 per cent discount to the 186-day volume-weighted average price of 68 cents. The shares were unchanged today at 96 cents.

Shareholders eligible will be those registered on Feb. 10. Former chair Andrew Barnes, who stepped down on December 31, has committed to taking up his rights for his more than 20 per cent stake, although that wasn't mentioned in today's announcement.

Subject to NZX accepting PaySauce's application for quotation of rights, shareholders can exercise some or all their rights, sell all or some of their rights on NZX, or allow their rights to lapse by doing nothing.

Rights trading is expected to begin on February 7 and close on February 25 and the new shares will be allotted and begin trading on Monday, March 9.

The company had said it sold $1.5m of convertible notes to clients of Cleary Wealth Management but it didn't draw down the full amount, chief executive and co-founder Asantha Wijeyeratne told BusinessDesk.

As well as locking in a sizeable capital gain on paper – at the theoretical rights price, the converted notes will be worth about $2.14m – the noteholders will also be eligible to participate in the rights issue, Wijeyeratne said.

While they were due to mature on June 30, 2021, paying 11 per cent interest a year in the meantime or 13.5 per cent if PaySauce failed to achieve agreed growth targets, the holders were protected by anti-dilution conditions.

Last week, the company said recurring revenue in the December quarter nearly doubled from the year-earlier period to $461,400 with annual recurring revenue exceeding $2m.

PaySauce, which targets small to medium-sized businesses, reported an $862,028 loss for the six months ended September, from a $2.51m net loss in the same six months the year before.

It had negative equity of $1.52m at September 30 and accumulated losses to that date of $7.03m.

However, cashflow in the latest six months rose to $4.4m from $828,976 in the year-earlier six months and it had $11.5m net cash at balance date.

PaySauce listed on NZX on December 21, 2018 via a backdoor listing through the shell of Energy Mad.