The Prospect Resources (ASX:PSC) share price is sinking today despite the company announcing completion of a strongly supported placement.
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At the time of writing, the lithium producer’s shares are tumbling 8.1% to 17 cents.
Investors are sending Prospect shares lower as they come to grip with impending share dilution from the company.
According to its release, Prospect has received subscriptions to raise $6.5 million from institutional and sophisticated investors. Approximately 41.9 million new ordinary shares will be allocated at an issue price of 15.5 cents apiece. This represents a discount of 16.2% on Tuesday’s closing price of 18.5 cents before the trading halt came into effect.
Prospect highlighted that the strong support came from its largest shareholder, among new international and domestic institutions. The board and the management team also tapped into the company’s register.
The funds raised will be used to complete the acquisition of a further 17% interest in the Arcadia Lithium Project. This will increase Prospect’s holding to a total of 87%. In addition, the remaining monies will be used to advance the development funding process and for capital working purposes.
Settlement of the new shares is expected to take place on 23 April 2021.
Prospect managing director Sam Hosack commented:
The need for further, high-quality lithium projects to be developed in the face of a looming critical shortage in lithium-ion battery materials is becoming increasingly evident to industry and investment markets.
Arcadia is in the unique position of being the only lithium deposit that is expected to operate in the lowest cost quartile via production of both low iron spodumene concentrate for the lithium-ion battery market and high purity petalite lithium concentrate for the glass and ceramics markets.
Prospect share price snapshot
Over the past 12 months, the Prospect share price has accelerated by 70% but is flat year to date. The company’s shares reached a 52-week high of 27.5 cents in August last year, before moving in circles.
Based on the current share price, Prospect presides a market capitalisation of roughly $56.4 million, with 332 million shares outstanding.
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Motley Fool contributor Aaron Teboneras 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.