Here’s why the Leigh Creek (ASX:LCK) share price is crashing 8% downstream today

What did the company announce?

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The Leigh Creek Energy Ltd (ASX: LCK) share price is one of the worst performers on the ASX this morning. This comes after the energy producer announced an institutional share placement to a United States-based investor.

At the time of writing, Leigh Creek Energy shares are down 8.57% to 16 cents.

What are the details of the placement?

Investors are driving down the Leigh Creek Energy share price today as the company is set to dilute shareholder value.

According to its release, Leigh Creek Energy advised it has secured up to $20 million (before costs) through a placement. The leading investor in energy transitions, Energy Exploration Capital Partners, LLC is the sole participant in the equity raise.

There will be 3 different phases to the placement. The initial issuance of 14.8 million shares will see net proceeds of $7.5 million handed to Leigh Creek Energy. It will be priced at the average of the 5 daily volume-weighted average prices (WVAP) less a 10% discount.

Following on, the second and third phases may take place provided that the market price for the company’s shares don’t fall below 8.5 cents. Leigh Creek Energy could potentially receive further net proceeds of $3.9 million and $3.6 million respectively. The latter is subject to shareholder approval, which is expected to be sought within the next 3 months.

Additionally, another $5 million is available with consent from Energy Exploration Capital Partners.

Leigh Creek Energy will use the funds from the placement for a number of key aspects of its flagship project. The Leigh Creek Urea Project (LCUP) will see stage 1 onsite works followed by ongoing stage 2 study and development costs.

Leigh Creek Energy managing director, Phil Staveley, commented:

This is the next, vital, stage in our overall, larger project funding strategy, which will be executed over the course of the next year. EECP originally invested in LCK 12 months ago, based on our prospects at that time. LCK has achieved a lot since then.

It is a testament to our performance that EECP are not only still shareholders but that today they are also prepared to invest a larger additional amount.

Leigh Creek Energy share price summary

Since this time last year, the Leigh Creek Energy share price has largely moved in circles and registered a loss of 5.88%.

Leigh Creek Energy commands a market capitalisation of roughly $133.4 million and has approximately 847.1 million shares on issue.

Should you invest $1,000 in Leigh Creek Energy right now?

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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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