Capitala Finance’s IPO & The Insider Trade That Surrounded It

Capitala Finance IPO: On Monday, Paul H. Chapman, Director at Capitala Finance Corp (NASDAQ:CPTA), started a position in the firm. He acquired 2,500 shares at $19.20 each, investing a total of approximately $48,000. The company only went public last week; last Wednesday, Sept. 25th, it priced its initial public offering (IPO) of 4,000,000 shares of its common stock at a public offering price of $20.00 per share. Total gross proceeds added up to approximately $80 million.

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Capitala is an externally administered closed-end management investment company that generates both current income and capital appreciation through debt and equity investments. Managed by Capitala Investment Advisors, it intends to elect to be treated as a business development company (BDC).

The IPO opened for trade at $19.15, slightly below the price that Chapman paid. Deutsche Bank Securities Inc., UBS AG (US listing) (NYSE:UBS) Investment Bank and Barclays PLC (ADR) (NYSE:BCS) acted as joint book-running managers for the offering. In addition, BB&T Capital Markets, Oppenheimer & Co., Janney Montgomery Scott, Stephens Inc. and Wunderlich Securities acted as co-lead managers.

The company also granted the underwriters a 30-day overallotment option to acquire up to 600,000 additional shares of common stock. The Management intends to “use the net proceeds from this offering to make investments in privately held smaller and lower middle-market companies in the United States and for general working capital purposes” (GlobeNewswire). The IPO was closed on Monday Sep. 30th.

“The conversion of two former CapitalSouth Partners investment funds into a business development corporation called Capitala Finance Corp. could mean more financing available for local businesses, said Ken Berryman, a director of Capitala Investment Advisors whose office is in Louisville” (BusinessFirst). And he added “As a business development corporation, Capitala will continue making loans to businesses, as CapitalSouth does. But because it is publicly traded, it will be able to raise capital more efficiently.” He assured that their way of doing things will not change, only the funding will. In the process of the company going public, those investors who had endowed the two funds that became Capitala, were quite beneficiated.

There are still no big hedge funds known to have invested on Capitala, but the time should arrive soon enough.

Disclosure: Javier Hasse holds no position in any stocks mentioned

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