Here’s why the Fertoz (ASX:FTZ) share price is sinking 6% today

This small cap ASX share has investors running for the hills today.

| More on:
sad and disappointed farmer on a farm with a tractor in the background

Image source: Getty Images

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.

Should you invest $1,000 in Fertoz right now?

Before you consider Fertoz, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Fertoz wasn't one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Materials Shares