Archer Materials (ASX:AXE) share price dives on capital raising update

An impending share dilution could be concerning investors.

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The Archer Materials Ltd (ASX: AXE) share price has come out of a trading halt today to backtrack mid-afternoon. This comes after the materials technology company provided an update on its recent equity raise.

At the time of writing, Archer shares are swapping hands for $1.60, down a sizeable 7.78%

Archer completes placement

One catalyst for today’s fall in the Archer share price could be investor concerns over an impending share dilution.

According to its release, Archer announced it has received firm commitments for its institutional placement to raise $15 million before costs. The company highlighted that it has strong support from both domestic and offshore institutional investors.

The offer will see approximately 10.3 million new ordinary shares issued at a price of $1.45 apiece. This represents a 16.4% discount to the last closing price of $1.735 on 30 September (before going into a trading halt).

Archer Materials will use its existing placement capacity to create the new shares. Under listing rule 7.1, this allows the company to issue up to an additional 15% of its total shares without shareholder approval.

The company will primarily use the proceeds to develop its CQ quantum computing chip and lab-on-a-chip biochip technologies. In particular, Archer will allocate the funds to:

  • Progressing its world-first technology development, including its CQ chip and Biochip
  • Utilising technology development infrastructure and facilities, R&D, people, and IP, to support pre-market development of the company’s technologies
  • Protecting intellectual property assets such as patents and international patent applications
  • Establishing and strengthening new and existing commercial partnerships in Australia and abroad
  • General working capital

Settlement of the new shares is expected on Thursday 7 October, with allotment scheduled for the next day.

In addition, Archer will launch a non-underwritten share purchase plan (SPP) of $5 million to be offered to eligible investors. The terms will be the same as the institutional placement.

The SPP closes on 28 October, with allotment of the new shares on 4 November.

About the Archer share price

Despite today’s falls, Archer shares have gained around 233% in the past 12 months. However, the company’s share price is around 50% off its all-time high of $3.08 from mid-August.

Based on valuation grounds, Archer presides a market capitalisation of $395.07 million, with almost 227 million shares outstanding.

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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.

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