Why is the Strike Energy share price tanking 10% today?

The Strike Energy Ltd (ASX: STX) share price has come out of a trading halt to nosedive today.

At the time of writing, the energy producer’s shares are down 10.18% to a near two-month low of 24.7 cents.

What’s driving Strike Energy shares lower?

The tanking of the Strike Energy share price follows the company’s announcement that it has successfully completed a capital raise.

Investors may be concerned about the impending share dilution, which might be causing the sell-off.

In its release, Strike Energy advised it has received binding commitments to raise $30 million from an array of investors. This includes local and international institutional, professional, and sophisticated investors.

Strike Energy will issue approximately 127.66 million new shares at a price of 23.5 cents per share. The offer represents a 14.5% discount to the last closing price of 27.5 cents per share on 31 August.

The new shares are expected to be issued on 12 September.

Proceeds of the placement will be allocated towards a number of the company’s objectives, such as:

• The Mid West Low Carbon Manufacturing Precinct freehold land ($7.7 million)
• Project Haber and South Erregulla drilling ($17 million)
• General working capital and corporate purposes.

Strike Energy managing director and CEO, Stuart Nicholls commented:

This timely capital injection allows Strike to accelerate the momentum at its transformational Project Haber fertiliser development whilst the pre-FID financing processes move towards conclusion.

The timing of this additional capital also provides resilience to the balance sheet during the construction and commissioning of the Company’s first gas field development at Walyering.

These two projects are imperatives for Strike to provide both the fastest path to free cashflow and to maximise the value of the company’s enormous natural gas endowment via the long-term value of Haber.

Strike Energy share price snapshot

Strike Energy shares are down 6% over the past 12 months.

However, year-to-date its shares are up 11%.

Strike Energy commands a market capitalisation of roughly $565.61 million, with approximately 2.06 billion shares on issue.

The post Why is the Strike Energy share price tanking 10% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. 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 Scott Phillips.

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