CHEAP AND EASY
Another stormy set of numbers from Curro as HEPS for the year ending December 2013 increased by 83% and learners were up 69%. However, the real issue was another rights issue at R20 per share raising R589m. The logic here is simple and we saw it with another PSG company – when Capitec* did a series of rights issues. The point is that the Curro share is expensive whichever way you fold it, so management is taking the view that this is a cheap way to raise money and it is right. If the share was half the current price − and this would still be expensive − management would either have to halve the amount being raised or double the number of shares being issued. This would mean doubling the dilution for the same amount of money from the issue, but when the shares are expensive it makes for a cheap and easy way to raise money.