i must admit i was caught off guard by this cap raise. its a...

i must admit i was caught off guard by this cap raise.

its a little disappointing that they are raising such as large amount, 20% dilution relative to their 1 billion market cap.

the presentation and statement are light on detail in typical fnp fashion so i hope they can execute well and that this cap raise end well in terms of fully diluted eps growth.

the company is on a high p/e based on the presumption that they will attain rapid eps growth over 2019-2021 using currently available funds, therefore they now need to increase their growth outlook in order to justify the major dilution. the current guidance for 40% revenue growth needs to flow through to expanded ebitda margins and rapid ebitda growth to justify the valuation.

they have spent several years heavily investing in manufacturing capacity and did not warn investors that they would continue to invest so heavily in capex, so they need to generate a high return on invested capital to justify this in a likely rising interest rate world over the next few years.

bottom line is that i trust management and the board. they obviously see demand that current manufacturing capacity simply cannot meet. this across multiple global markets and product divisions. this makes sense because as they have done the hard work already in creating the products and entering markets snd building brand power, now they cant keep up with demand so they need to build scale which will expand margins and gross sales.

so i think this will be good for fnp medium term but may place downward sp pressure short term. i reduced my heavilyoverweight position when so hit 5.60 a couple of months back so will take my entitlement and look to add a little extra if it dips to oversold territoryto say 4.50-4.60ish which is a nice medium term entry point.