The Fertoz Ltd (ASX: FTZ) share price is having a day to forget today. This comes after the organic fertiliser producer announced an update on its recent share placement.
During mid-afternoon trade, Fertoz shares are down 6% to 23.5 cents apiece. In earlier trade, the company's shares had dropped by more than 13% before staging a partial recovery. In comparison, the All Ordinaries Index (ASX: XAO) is up 0.07% to 7,604.80 points.
What's dragging the Fertoz share price lower?
Investors are scrambling to sell Fertoz shares as the company prepares to dilute existing shareholder value.
According to its release, Fertoz advised it has received firm commitments to raise $5 million through a share placement. The offer was presented to both sophisticated and professional investors at an issue price of 15 cents per share. This equates to roughly 33.33 million new ordinary shares being added to the company's registry.
The shares will be split across two separate tranches, with the first portion falling under the company's listing rule 7.1. This allows up to 15% or 20 million new shares to be issued without shareholder approval.
The second portion of shares will be subject to shareholder approval at an extraordinary general meeting (EGM) to be held in 6 weeks.
Proceeds of the placement will be used to accelerate development of the company's carbon division. In particular, this will focus on carbon sequestration, consulting activities, trading and implementation of carbon strategies using Fertoz organic fertilisers.
The remaining monies will be also allocated to recruiting carbon specialists and expanding Fertoz's North American organic phosphate sales team.
Management commentary
Fertoz executive chair Patrick Avery spoke about the placement, saying:
Our Carbon division is an exciting growth opportunity for Fertoz, and we are pleased to receive strong support from new and existing shareholders to enable us to accelerate its development.
Carbon credits are a growing trend right now and we want to capitalise on our position to be a leader in this field. Our Carbon division has already proved popular with customers and will greatly enhance our ESG credentials.
In addition, completing this $5 million placement will enable us to grow our sales team in North America, and it is important to us to continue to scale up our organic fertilizer operations as the foundation of our business across multiple regions.
The Fertoz share price has gained more than 230% over the past 12 months and is also up by over 300% in 2021.
