Analyzing Broo Ltd's Share Price Movement: A Case Study

This report analyzes the share price movement of Broo Limited, an ASX-listed company specializing in Australian beer, over a two-year period. The analysis delves into various factors impacting the company's stock performance, including share placements, the appointment of a non-executive director, changes in director's interests, responses to ASX price queries, dividend policies, and the release of options and shares from escrow. The report also examines the impact of Broo securing a major distribution network in China on its share price. The findings highlight the fluctuating nature of the share price and the influence of company announcements and market events. The report provides recommendations for investors, emphasizing the importance of staying informed about company news and ASX releases before making investment decisions. The analysis incorporates financial data, announcements, and market trends to offer a comprehensive overview of Broo Limited's financial performance and market position.

Running head: CONTEMPORARY ISSUES IN ACCOUNTING
Contemporary issues in accounting
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Executive summary
Main objective of the report is to analyse the share price movement of ASX listed company Broo
Limited for the last 2 years which is engaged in selling unique type of Australian beer and
distinguish itself from the competitions through its strong brands, unique platform of marketing,
company ethos and quality of beer products. the task will highlight different events that greatly
impacted the company’s share price.

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Table of Contents
Introduction......................................................................................................................................3
Analysis...........................................................................................................................................3
Share price movement.................................................................................................................3
Raising fund through share placement........................................................................................4
Appointment of Mr. Mathew Newborn as Non-executive director.............................................5
Changes in director’s interest......................................................................................................5
Response to the price query of ASX............................................................................................6
Dividend policy...........................................................................................................................7
Release of Options and Shares from Escrow...............................................................................7
Broo secured major distribution network of China.....................................................................8
Conclusion and recommendation................................................................................................8
Reference.....................................................................................................................................9

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Introduction
Worth or total market value of a company is known as its market capitalization or the
market cap. This is represented by stock of the entity multiplied by number of outstanding
shares. Share price of any entity is determined though the demand and supply in market that is
driven generally by technical as well as fundamental analysis. Market value of the entity is
changed in every second with the fluctuation of shares in market. Fall or rise in the share price
has direct impact on the entity. Falling of share price can make it difficult for the entity to raise
the funds for paying the future expansions whereas the increasing share price provides more
flexibility regarding raising of money from shareholders. In this task the share price information
for the ASX listed company Broo Ltd for the past 2 years will be analysed.
Analysis
Share price movement

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Figure 1: Share price movement
(Source: In.finance.yahoo.com, 2019)
From the above it can be identified that the share price movement of the company is
fluctuating. For instance, in November 2017 the share price went up significantly whereas from
March 2019 the share price dropped and did not rise after that. Different reason are there or the
up and down of the share price those are stated in the report (In.finance.yahoo.com, 2019).
Raising fund through share placement
Board of the Broo Ltd on 31st August announced that it raised an amount of $ 2 million
through private placement of 10,000,000 ordinary shares to the sophisticated investors at the rate
of $0.20 per share. The amount raised through the private placement will be utilised for the
purpose of working capital and for funding promotion and expansion of the company’s products.
The entity further intends issuing placement shares under 15% placement capacity that is in
compliance with the listing rule 7.1 of ASX. It is expected that the new placement shares will be
allocated by 7th September 2018. However, the private placement will reduce the share price of
the company at least for short term period (Asx.com.au, 2019). Further, it will dilute the existing
shareholder’s ownership to the percentage of this placement size. Dilution of the ownership will
generally reduce the share price. Further, this placement will lead to a similar situation like stock
split. Some advantages that can be obtained by the company through private placement are –
 Diversification of the fund raising – fundraising through private placement assists the
entity in diversifying the source of fundraising and the capital structure. It helps the entity
in organizing capital structure with regard to debt equity structure and will help in
managing debt obligations (Asx.com.au, 2019).

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 Sell to the accredited investors – through this placement the issuer can sell the complex
securities to the selected group of investors those are interested after knowing the risk and
return of the securities.
 Lesser requirements of regulation – it requires limited amount of public disclosures and
fewer amounts of regulatory requirements as compared to public offering. Hence, the
entity can deal privately as well as offer securities at fixed and negotiated price
(Asx.com.au, 2019).
Appointment of Mr. Mathew Newborn as Non-executive director
On 2nd March 2018, the entity announced about the engagement of Mr Newborn as the
company’s non-executive director. He brought wealth of the experience along with contacts in
hospitality and liquor industry to the new role of the entity. At present he is the general manager
of McGuires Hotels that is one of the biggest independent hotel groups from Queensland.
Further, he oversees the supply chain, business, managing and marketing more than 400
employees. He is expected to make his contribution in integration and acquisition of more than
75 hotels for Coles Liquor Group. It is expected that the appointment of Mr. Newborn will help
the entity in growing of its business that will in turn increase the company’s share price
(Asx.com.au, 2019).
Changes in director’s interest
Phillip Grundy, who was the director of the company since 18th October 2016 ceased to
be the director from 2nd March 2018. He was the registered holder of the company holding 150
ordinary fully paid shares and 5,000,000 options with the exercise price of $0.30 that is to be
expired on 4th July 2020 and escrowed till 14th October 2018. Apart from that, Geoffrey de
Graaff, who was the director of the company since 18th October 2016 ceased to be the director

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from 2nd March 2018. He was the registered holder of the company holding 10,000,000 options
with the exercise price of $0.30 that is to be expired on 4th July 2020 and escrowed till 14th
October 2018. Hence, these shares will be made available for public offerings that will have
considerable impact on the share price of the company (Asx.com.au, 2019)
Response to the price query of ASX
Broo Ltd complies with the listing rule 3.1 and no information requirement is there to be
provided to ASX regarding the financial condition as per the rule. As per the listing rule 3.1 any
listed entity shall provide any information to ASX immediately if any reasonable person is
expected to have material effect on the price of the securities. Further the company confirmed
that responses to questions have been approved and authorised by the board (Simplicity, 2019).
However, if the response to ASX is not sent in time, ASX may impose trading halt on the
company. In case of trading halt, the following shall be provided –
 Reasons behind trading halt
 Period of trading halt to be in existence
 Event expected to be taken place after end of trading halt
 Unaware of the reason behind non-grant of trading halt
 Other necessary information required to inform the market regarding trading halt.
However, no such cases were found in case of Broo Ltd that will have positive impact on
the company’s share price (Simplicity, 2019).

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Dividend policy
The company’s board aims to deliver value to the shareholders through dividend returns.
It considers following circumstances while assessing the criteria of dividend payment as follows
–
 Company’s historic earnings
 Current as well as on-going cash flows and the requirement of funding
 Growth objective of the entity
 Long-term interest of the shareholders and their expectation as compared to dividend and
profit performance
 Company’s capital structure
The company subject to section 254T of Corporation Act intends to pay unfranked
dividend with regard to each of full financial year of the entity closing 31st December of each
year. It further intends distributing minimum of 10% of the NPAT to the shareholder through
dividends for each financial year commencing from the financial year closing 31st December
2016. Maximum amount of dividend intended to be paid out of NPAT through dividends in any
financial year is 20% of NPAT. Regular dividend payment will influence more investors to
invest in the company that will in turn have positive impact on company’s share (Simplicity,
2019).
Release of Options and Shares from Escrow
In compliance with the listing rule of ASX 3.10 A, Broo Ltd advised on 28th September
2018 that 58,342,500 unlisted options those are exercisable at $0.30 and will expire on 4th July
2020 shall be released from the escrow on 13th October 2018. Further, 470,252,070 ordinary

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shares of the entity will be released from the escrow on 14th October 2018. Releasing the shares
from escrow means the shares those were held by the directors or early investors who were
restricted from selling the same for the period of 1 to 2 years. Release of the shares will have big
impact on the share price of the company (Shareholders.broo.com.au, 2019).
Broo secured major distribution network of China
It can be identified that the company’s share price went up significantly during
November 2017. The main reason behind the same was on 27th November 2017 the company
announced that as the part of the company’s strategic distribution partnership of the Broo
Premium Lager beer products in China through its wholly owned subsidiary Broo Expert Pty Ltd
entered into the binding agreement with Beijing Jihua Information Consultant Ltd for marketing
and distributing exclusively Broo Premier Lager beer products for 7 years in China. Extensive
distribution network of Jihua will expand the Broo Premier Lager beer products that will not
only offer into the supermarket and the retail chains but also in china’s hospitality industry
(Brooinvestors.com.au, 2019).
Conclusion and recommendation
In the above presented report, the share price movement for Broo Ltd has been analysed
with the help of different reasons behind the rising or dropping of share price. In Australian share
market the investors are getting proper information regarding Broo Ltd that helps them taking
appropriate decision regarding whether to buy, hold or sell the shares of the company. It is
further found that the announcement, news and media releases have direct impact on the share
price movement of the entity. However, it is recommended that the investors shall go through the
news, recent announcement made by ASX regarding the company and media releases made by
the company before taking decisions regarding company’s share.

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Reference
Asx.com.au. 2019. [online] Available at:
https://www.asx.com.au/asxpdf/20180928/pdf/43yr7lp15qpptd.pdf [Accessed 14 Aug. 2019].
Asx.com.au. 2019. Announcements Search Results. [online] Available at:
https://www.asx.com.au/asx/statistics/announcements.do?
by=asxCode&asxCode=bee&timeframe=Y&year=2018 [Accessed 14 Aug. 2019].
Brooinvestors.com.au. 2019. [online] Available at:
https://www.brooinvestors.com.au/resources/pdf/Dividend_Policy.pdf [Accessed 14 Aug. 2019].
In.finance.yahoo.com. 2019. Yahoo is now a part of Oath. [online] Available at:
https://in.finance.yahoo.com/quote/BEE.AX/chart?p=BEE.AX [Accessed 14 Aug. 2019].
Shareholders.broo.com.au. 2019. Shareholders Broo Beer – Shareholders Information. [online]
Available at: http://shareholders.broo.com.au/ [Accessed 14 Aug. 2019].
Simplicity, T. 2019. Broo. [online] Broo.com.au. Available at: https://www.broo.com.au/home
[Accessed 14 Aug. 2019].

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