Australian-listed telecommunications services company ZipTel plans to use the AU$5 million it has raised in an institutional share placement to drum up interest in the flagship ZipT smartphone app that it is releasing next month.
The company, listed on the Australian Securities Exchange (ASX), told shareholders on November 10 that it had successfully raised AU$5 million through a share placement of 11.9 million shares, at AU$0.42 per share, to "domestic and international institutions".
The new placement has increased ZipTel's cash reserves to around AU$8 million, with major shareholder K2 Asset Management participating in the raising to maintain its 16.3 percent holding.
"The proceeds of the raising will enable ZipTel to aggressively increase its marketing efforts and accelerate subscriber acquisitions ahead of the imminent launch of the ZipT application next month," ZipTel told investors in a statement (PDF).
The ZipT app is a mobile-based international communications application that will allow people to send text messages and make international calls for free to other people with the app.
ZipTel co-founder and executive director Keaton Wallace said that the cash boost would help the company generate a user base for the app.
"Through our distribution deals in place with Mpire Media and Airloyal, the funds raised will allow us to aggressively acquire an initial subscriber base for the ZipT, which will in turn lead to further organic growth in subscribers through word of mouth or virality," said Wallace.
"With the launch of the ZipT application next month, we are another step closer to realising our goal of bringing a superior mobile-based calling application that operates all over the world under all network conditions, including low-bandwidth environments," he said.
ZipTel started life as AussieSim, with the prepaid travel SIM provider listing on the ASX in July via a reverse takeover of publicly listed sports merchandise company Skywards Limited.
Since then, AussieSim has become a wholly owned subsidiary of ZipTel, and the company has worked to diversify its telecommunications offering.
Wallace said that the new multimillion-dollar funding effort has validated the company's strategy.
"We're delighted to have received such strong support from institutional and sophisticated investors," said Wallace. "This placement both validates our company strategy and strongly supports the development and rollout of the ZipT application and the ongoing growth of our AussieSim product."
The funding comes as fellow ASX-listed data security company Covata — which also listed publicly thanks to a reverse takeover — successfully completes its initial public offering, closing oversubscribed with an AU$15 million share offering.