The Lithium Australia Ltd (ASX: LIT) share price is crumbling during mid-afternoon trade.
At the time of writing, the ASX lithium share is trading at 7.6 cents a share, down 8.43%.
What's powering down the Lithium Australia share price?
Investors are scrambling to sell Lithium Australia shares after the company provided an update on its recent equity raise.
In its release, Lithium Australia advised it has received firm commitments from investors to raise $12.1 million through a placement.
This will see the issue of roughly 185.77 million new ordinary shares at a price of 6.5 cents apiece. This represents a discount of 22% to the last closing price of 8.3 cents on 26 August, and a 21% discount to the 5-day and 10-day volume-weighted average price (VWAP) of 8.2 cents per share.
Existing shareholders, new high-net-worth sophisticated and institutional investors, including a director of the company, participated in the offer.
In addition, there is an attached one-for-two (1:2) option, with an exercise price of 10 cents per option. The expiry date is three years from date of issue.
The funds will be used to deliver safe recycling of spent battery volumes at Envirostream's operational facilities in Victoria. A national expansion study will also be undertaken during FY 2023. Envirostream is a wholly-owned subsidiary of Lithium Australia.
Furthermore, the remaining funds will be allocated to complete engineering studies for the expansion of VSPC's current facilities. The latter is also a wholly-owned subsidiary of Lithium Australia.
It appears investors are bracing for an impending share dilution from the company, which is driving down the Lithium Australia share price.
What did management say?
Lithium Australia chair George Bauk touched on the strategic placement, saying:
We are very pleased with the strong support from existing and new shareholders for the capital raising. This funding puts us in a strong position to continue to progress our core opportunities of battery recycling and advanced cathode materials. This is an exciting time for the company and we look forward to delivering on our strategy.
The Lithium Australia share price has fallen almost 40% over the past 12 months and is down 34% year-to-date.
