Gatekeeper Systems Announces Private Placement at 58% Premium

In our previous article on Gatekeeper Systems (CA:GSI – $0.90 & US:GKPRF – $0.69 & GER:1GK – €0.58) we wrote that chances were slim that the Company would ever have to do a private placement again as it is consistently reporting positive net earnings and strong working capital.

We were wrong! However, the terms at which the capital raise will be conducted are very exciting, to say the least. Gatekeeper intends to complete the non-brokered private placement of 5,000,000 units at a price of… $1.00 per unit, for total proceeds of $5 million. On the day of the announcement, Gatekeeper’s stock traded at 63 cents, which means the placement will be conducted at a 58% premium.

The Company further mentioned that it had received unsolicited interest for the entirety of the financing, and does not anticipate any finders fees or commissions to be paid. We have a feeling this is a large group that’s coming into the capital of Gatekeeper. This would be excellent news, as these groups tend to be long-term, loyal partners that seek substantial appreciation in share price. Moreover, we expect the financing to close soon.

Each unit in the financing will consist of one common share of the Company and one common share purchase warrant, with each warrant entitling the holder to acquire one additional common share at a price of $1.10 for a period of 24 months from the date of closing.

Conclusion

On May 31, 2020, Gatekeeper had over $1.75 million in cash on its balance sheet. So the question comes to mind “Did the Company really need to raise $5 million, especially in light of its growing sales and earnings?” The simple answer in no, it didn’t NEED to raise the money. They would have done fine without the additional cash. However, turning down a solid new shareholder who wants to enter the capital at a 58% premium would have been foolish.

In addition, it will help the Company grow even faster than anticipated. Budget is always a constraint. This capital will enable Gatekeeper to add personnel, which will help to roll out its intelligent video solutions. Needless to say the stock hit a new all-time high after this announcement. Since our recommendation in March, the stock has gone up 500%. The financing is yet another step in Gatekeeper’s growth story. Smallcaps Recommendation: BUY.

Smallcaps.us Advice: Buy	Price Target: $0.69	Latest Company Report (pdf)
For important disclosures, please read our disclaimer.