Launching a public company offer can take several months of planning and preparation for both the company and Snowball Effect's team. Throw into the mix a global pandemic like COVID-19, and you have the makings of a unique capital raise.
That was precisely the situation plant-based food manufacturer Little Island and Snowball Effect found themselves in as New Zealand entered a nationwide lockdown in March 2020.
Little Island set out to raise between $1.5m and $2m of new capital, with the opportunity for oversubscription of up to an additional $500k. The funds raised would help Little Island to acquire a local yoghurt company, invest in product development and innovation, increase investment in branding and marketing, and test new markets.
The Snowball and Little Island teams began working on preparing the capital raise in early 2020. "Things were globally starting to look sketchy with COVID-19, but it wasn't that bad in New Zealand when we launched the offer in early March," recalls David Curtis, Snowball's Director of Growth Capital.
However, once stay-at-home orders were announced in New Zealand in late March, the campaign was paused immediately. "As lockdown hit, stock market prices fell creating buying opportunities which diverted some investor attention away from private investment opportunities, like the Little Island offer, while also creating more caution from other investors,” says David.
An investor sentiment survey conducted by Snowball Effect at the time found that during the early stages of the COVID-19 lockdown more than 60% of survey respondents felt pessimistic or neutral about the New Zealand economy for the next 12 months.
With the country in lockdown and many companies closed, Little Island was fortunate to find themselves an essential service who could keep making and supplying their products to supermarkets. "Once we knew that we were designated an essential business, the main focus for us was on safe operations for our people, and to ensure we could maintain the supply of products," says Matt McKendry, Little Island's Chairman.
It quickly became evident that Little Island's financial forecasts and business strategy had to be updated as a result of COVID-19. "The main change we made was to reconsider our short term growth path, given changes in the environment," reflects Matt. "This meant dialling back export growth priorities, which are clearly more difficult with travel restrictions and changing the rate that we expect to launch new products because of the general uncertainty in the consumer market. Once we were clear on the reprioritisation in the business, the offer document was amended to reflect that."
The Snowball team was also busy. "We were upfront communicating with investors about how the pandemic was going to impact the Little Island business and their strategy," says David. "We were able to demonstrate through an online webinar and investor meetings that Little Island had strong management and leadership, and was well placed to navigate through the uncertain environment."
Snowball's investor sentiment survey found that as the COVID-19 lockdown progressed, investor confidence in the New Zealand economy grew. The survey also revealed that Kiwis desire to invest in private New Zealand companies increased towards the latter half of the lockdown. David attributes this in part to the low-interest-rate environment at the time, which encouraged Kiwis to seek out better returns through private investments.
The increased confidence in the New Zealand economy and private investing helped Little Island to exceed their original investment target, closing their capital raise at more than $3.2m in early June 2020 (including the conversion of $695k of existing loans).
When reflecting on the capital raise, Matt from Little Island says they were delighted with the outcome despite the less than ideal circumstances. "We had been planning and preparing for the raise, and acquisition for at least a year. COVID may have changed the timing, but not the ambition."