Falcon Metals (ASX:FAL) share price nosedives 28% on IPO

It was a harsh debut for the ASX’s newest listing today.

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Newly-listed Falcon Metals Ltd (ASX: FAL) has crashed from its initial public offering (IPO) as investors drive down its share price in the secondaries.

At market close, the ASX’s newest addition finished down 28% at 36 cents apiece after listing at an oversubscribed offer of 50 cents per share.

Falcon is the gold mining demerger from Chalice Mining Ltd (ASX: CHN).

Chalice made the decision to spin off Falcon in order to focus on its Julimar Ni-Cu-PGE Project and the new West Yilgarn Ni-Cu-PGE Province in Western Australia.

What’s the situation?

Chalice shareholders voted strongly in favour of the demerger earlier this month.

In light of the vote, eligible shareholders now own 1 Falcon share for approximately every 3.0341 Chalice shares held on the in-specie record date of 13 December.

That in-specie distribution of Falcon shares to eligible Chalice shareholders was completed today, in conjunction with the issue of shares to participants in the IPO undertaken by Falcon.

Today, Falcon closed a $30 million via a 50 cents per share offer in the primary market that was announced earlier this month.

Although this momentum didn’t carry through to its entry into the secondary markets, this won’t impact Falcon who will keep the net proceeds of $30 million.

As such, initial investors are left catching the falling knife, as they say.

The ATO Class Ruling outlining the tax implications for certain shareholders due to the demerger is expected to be finalised in the next few weeks.

An announcement will be made to the ASX once finalised. With respect to Falcon’s operations, drilling activities are anticipated to commence at Pyramid Hill in January 2022, according to the company.

Regarding the demerger, Falcon Metals’ Managing Director Tim Markwell said:

Falcon Metals is excited by the opportunity to further explore the gold projects spun out by Chalice. All of them are in areas considered highly prospective for gold discoveries, with Pyramid Hill particularly noteworthy due to its location in the Bendigo goldfield and proximity to Fosterville, while Viking and Mount Jackson are also very promising. We believe our experienced team can help us further develop these assets and unlock their potential value.

What now for Falcon?

The admission of Falcon to the official ASX and quotation of its shares was conditional on the satisfaction of ASX’s listing conditions.

Falcon shares began trading at 2pm (AEDT) on Wednesday, finishing the session at 36 cents.

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The author has no positions 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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