Why Argosy Minerals Limited shares plunged 16% today

The Argosy Minerals Limited (ASX:AGY) share price has sunk lower in morning trade. Should you buy the dip?

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

One of the worst performers on the market this morning has been the Argosy Minerals Limited (ASX: AGY) share price.

In morning trade the mineral exploration company's shares have emerged from their suspension and plunged 16% to 26 cents.

What happened?

This morning Argosy Minerals advised that the proposed $16.9 million investment by China-based Qingdao Qianyun has fallen through following delays to its due diligence period.

Whilst this might ordinarily be a bad thing, it certainly isn't this time around.

Qingdao Qianyun was due to pay just 8.5 cents per share for the 19.9% stake in the lithium-focused mineral exploration company.

This has now been replaced with a $15 million placement of ordinary shares to institutional and sophisticated investors at 22 cents per share. A further $2 million will be raised at the same price via a share purchase plan.

This works out to be 159% premium to the price that Qingdao Qianyun was set to pay, resulting in far less dilution for existing shareholders.

Furthermore, although the investment fell through, the $9.5 million upfront prepayment for its off-take agreement with the battery company remains in place.

So why did its shares fall?

I feel today's decline is likely to be a case of profit taking ahead of the placement or a misreading of today's release.

After all, at first glance this announcement could easily be interpreted as bad news, whereas it is actually a big positive for the company and its shareholders in my opinion.

Should you buy the dip?

While its shares look to be great value following this decline, my preference in the industry remains Galaxy Resources Limited (ASX: GXY).

Even after its strong rally I think its shares have meaningful upside potential in the long-term thanks to the rise of electric vehicles.

Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. 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 Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »