One of the worst performers on the market this morning has been the Syrah Resources Ltd (ASX: SYR) share price.
The graphite miner's shares have fallen 5.5% to $3.59 after emerging from their trading halt.
Why are it shares lower?
Syrah's shares went into a trading halt on Tuesday pending a $110 million fully underwritten placement of shares.
After considering the alternatives, the company decided that this was the best way for it to finance the ramp up of its Balama graphite project and to support the acceleration of its Battery Anode Material (BAM) strategy.
Debt funding was deemed too expensive by management and would have come with restrictions and other encumbrances that would limit Syrah's flexibility to accelerate its value-adding strategic options.
So instead the company chose to place 7.4 million new shares with institutional investors at $3.38 per share to raise $25 million, and offer eligible shareholders a pro rata accelerated non-renounceable entitlement offer of new shares at $3.38 to raise the remaining $85 million.
This morning the company announced the completion of the placement and the raising of $74 million from investors. Whilst management appears pleased with the capital raising, I was surprised to see it only raise two-thirds of the target amount. Thankfully, though, it was fully underwritten.
Should you buy the dip?
There's no doubt in my mind that Balama is a world-class asset and could provide the company with bumper profit growth over the next few years if it doesn't upset the supply and demand balance.
But I would suggest investors hold off until production begins and the company is generating revenue.
By being patient I think investors will be in a better position to judge whether the increase in supply that Balama brings will negatively impact pricing.
