The Orocobre Limited (ASX: ORE) share price has been the worst performer on the S&P/ASX 200 Index (ASX: XJO) on Monday.
In afternoon trade the lithium miner’s shares are down a disappointing 10% to $2.61.
Why is the Orocobre share price crashing lower today?
This morning Orocobre’s shares returned from a trading halt following the successful completion of the institutional component of its capital raising.
According to the release, the fully underwritten placement has raised approximately $126 million at an issue price of $2.52 per share. This represents a sizeable 13.1% discount to the last close price of $2.90 per share.
Why is Orocobre raising funds?
Orocobre is raising the funds to ensure that its Olaroz Stage 2 development plan is fully funded and to deliver on its Olaroz Stage 1 plans through a range of operating, COVID-19, and pricing environments.
Those pricing environments refer to the further collapse in lithium prices this year due to an oversupply of the battery making ingredient and subdued demand.
It was because of the collapse in prices that Orocobre posted a 50% decline in revenue to US$77.1 million and a US$67.1 million loss after tax in FY 2020. The latter compares very unfavourably to a net profit after tax of US$65.4 million a year earlier.
In addition to the above, the company intends to use the funds from the placement and an accompanying share purchase plan for future growth initiatives.
Share purchase plan.
Orocobre will now push ahead with its share purchase plan to raise a further $30 million.
Eligible shareholders will be able to acquire up to $30,000 of new shares. This will be at the lower of the placement price or a 2% discount to the five-day volume weighted average price up to the closing date.
Orocobre’s CEO, Martin Perez de Solay, was very pleased with the support shown for the placement.
Mr de Solay said: “We are very pleased with the support shown by our institutional shareholders and other institutional investors for the Placement. We see the success of the Placement as a clear endorsement of Orocobre’s decision to deliver financial flexibility to support Stage 1 and Stage 2 development through a range of operating and pricing environments.”
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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