It wasn't a great day for the Hexagon Energy Materials Ltd (ASX: HXG) share price, sinking 10% to 13 cents by the close of trade. This comes after the company came out of a trading halt today, announcing it had successfully completed a placement.
Let's take a closer look at the company update.
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Placement to fund Pedirka
It appears investors are selling Hexagon shares and heading for the hills as the company faces an impending share dilution.
In today's release, Hexagon Energy advised it has received $6.2 million in firm commitments by a way of placement. The offer was heavily subscribed by institutional and sophisticated investors at an issue price of 11 cents per share. The new fully-paid ordinary shares represent a 9.5% markdown to the 30-day volume-weighted average price (VWAP).
The company will alot more than 56.3 million shares using its 15% placement capacity under listing rule 7.1. This allows up to 15% of its shares to be issued without shareholder approval.
Settlement of the shares is expected to occur on or around 5 May 2021.
What's the plan?
The funds raised will be primarily used towards completing the pre-feasibility study (PFS) and accelerating the Pedirka Blue Hydrogen project. In addition, the company will allocate remaining monies to other project obligations and for working capital purposes.
Hexagon highlighted that it has conducted several meetings with Genesis regarding project planning and timing of the PFS. The discussions have proved positive, with "substantial cost savings for the PFS program from initial budget estimates" which the company said significantly lowered the amount of funding required to complete the study.
In what may be a possible catalyst affecting the Hexagon Energy share price, the company also noted that "incorrect media reports" have been circulating. Recently, Hexagon Energy announced it has selected Air Products to become a key technology provider for the Pedirka project. However, there was a misunderstanding that both companies were in a contract, partnership or financial arrangement.
Hexagon Energy reiterated that a formal engagement between the parties will come to fruition if the PFS progresses and becomes viable. It further explained that there are multiple options for technical providers in all aspects of the Pedirka project.
What did management say?
Hexagon Energy chair, Charles Whitfield touched on the successful capital raise, saying:
We were delighted at the very strong level of interest shown by both existing and new investors in this capital raise opportunity…
With this capital in place, the work on Pedirka can be accelerated and the team is exceptionally excited about the months ahead.
About the Hexagon Energy share price
Despite today's significant fall, the Hexagon Energy share price has jumped almost 100% in the past 12 months. Looking at year-to-date performance, the company's shares are sitting above a 130% gain.
Hexagon Energy commands a market capitalisation of roughly $50 million, with approximately 389.6 million shares on issue.
