Why McGrath’s (ASX: MEA) share price is climbing today
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Why is McGrath’s share price rising?
McGrath’s share price is up after an update on its Oxygen (Oxygen) home lending business. According to the press release, the group has entered into a transaction “which will improve the scale and optimization” of the Oxygen business.
Oxygen raised an additional $ 2.5 million through a consortium fund injection. The consortium led by Doc Klotz, Ben Taylor and Sturt Capital Partners, will take a majority stake of 55% in Oxygen.
McGrath will reduce his stake in Oxygen to a 45% stake in hopes of propelling new growth. The Australian real estate group will also receive a three-year cash payment of $ 1.8 million.
McGrath’s share price jumped higher following yesterday’s announcement. At the time of writing this report, shares of the property management group were trading at $ 0.65 per share.
McGrath will enter into a referral agreement with Oxygen and retain one of three seats on the board. McGrath CEO Eddie Law said the transaction can “unlock the significant potential that the merged company will offer on our platform.”
“A simpler loan underwriting process will allow our sales agents to facilitate the delivery of mortgages to buyers,” he added.
McGrath’s stock price has performed well in 2021, climbing 39.1% year-to-date through Tuesday’s close. This is a significant outperformance against many of its peers and well above the 2.6% gain for the Index of all Ordinary (ASX: XAO).
Take away idea
McGrath’s share price jumped higher early in trading after a late afternoon announcement yesterday.
McGrath will reduce his stake in Oxygen Home Loans while retaining a controlling interest and a seat on the board of directors.