The Cadence Capital Ltd (ASX: CDM) share price is zipping higher today after the company provided an update on its DeepGreen Metals investment.
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The Cadence Capital Limited (ASX: CDM) share price is really finding its rhythm today, as it pulls ahead of most of the ASX. This move comes after the international equities’ manager provided an update on one of its investments.
At the time of writing, Cadence Capital is trading at $1.00, an increase of 8.65% from yesterday’s closing price.
Metal is going green, going DeepGreen
Cadence’s update relates to an investment it made several years ago in a private company by the name of DeepGreen Metals. Before we jump into the recent developments, what is ‘DeepGreen Metals’?
DeepGreen Metals is quite an interesting business. The company’s focus is to produce metals from polymetallic rocks to power electric vehicles (EVs). Now that might not mean much unless you’re a geologist, so let’s crack it open.
Polymetallic rocks or nodules are rock formations containing iron and manganese hydroxides. These rocks happen to be abundant on the sea-bottom of most oceans of the world. As the formation contains a broad composition of copper, cobalt, nickel, and other elements, these nodules have the materials necessary for EV battery production.
The best part, they are just sitting on the ocean floor. That means no tearing up landscapes, impacting flora and fauna; it’s a ‘green’ way of harvesting these resources.
— DeepGreen Metals Inc. (@DeepGreenMetals) December 11, 2020
Why is DeepGreen driving up the Cadence Capital share price?
Announced overnight, DeepGreen Metals is set to go public on the New York Stock Exchange via SPAC. This will be done via the merger with the blank-check listed Sustainable Opportunities Acquisition Corp (NYSE: SOAC).
Once merged, the trading company will be known as The Metals Company under the ticker TMC.
Cadence Capital notes that the DeepGreen Metals investment is roughly 2.8% of the company’s portfolio. The proposed listing value of US$2.9 billion is far greater than the company’s current valuation. The most recent raising for the merger was priced at US$10 per share, whereas Cadence’s current investment is valued at US$1.38 per share. Based on this information, the reevaluation would lift Cadence’s overall portfolio value by approximately 20%.
The transaction is still subject to shareholder and court approval.
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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.