Why is this ASX lithium share crashing over 10% today?

Person with thumbs down and a red sad face poster covering the face.

Person with thumbs down and a red sad face poster covering the face.

The Galan Lithium Ltd (ASX: GLN) share price is having a tough start to the week.

At the time of writing, the ASX lithium share is down 11.5% to $1.06.

Why is this ASX lithium share being crushed today?

Investors have been selling down Galan Lithium shares today after the company completed the institutional component of its capital raising.

According to the release, the company has received firm commitments to raise $31.5 million through an institutional placement priced at $1.05 per share. This represents a 12.5% discount to where this ASX lithium share was trading prior to its halt.

Management advised that strong support was received from domestic and offshore institutional and sophisticated investors.

This leaves the ASX lithium share with a pro forma cash balance of approximately $50 million. It will also seek to boost this a touch further with a share purchase plan. That plan is aiming to raise approximately $5 million from retail shareholders at the same price.

Why is Galan Lithium raising funds?

The proceeds of the capital raising will be used to purchase long lead items for the lithium carbonate (LCE) pilot plant and the Stage 2 definitive feasibility study at Hombre Muerto West. In addition, the money will provide contingency funding for additional Greenbushes South work, further exploration, and production well drilling.

Galan Lithium’s managing director, Juan Pablo Vargas de la Vega, was pleased with the outcome. He explains:

This is an exciting time to be involved in the Galan story. I wish to thank all the placement participants, old and new, who have strongly supported the Galan production plan that will take it from an initial smaller scale lithium producer to a big 60ktpa player. I also encourage all our loyal shareholders to get on board and participate in the entitlement issue which will get underway later this week.

The post Why is this ASX lithium share crashing over 10% today? appeared first on The Motley Fool Australia.

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