Why are Liontown shares now suspended?

This lithium developer will be out of action until the end of the week. But why?

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Liontown Resources Ltd (ASX: LTR) shares were scheduled to return to trade on Wednesday.

However, an announcement this morning reveals that two days wasn't long enough for the company to get its affairs in order.

As a result, the lithium developer has now asked for its shares to be suspended from trade.

What's going on at Liontown?

As you may be aware, earlier this week, lithium giant Albemarle Corporation (NYSE: ALB) pulled the plug on a proposed takeover.

Liontown revealed that Albemarle's "decision to withdraw its proposal was due to the growing complexities associated with executing the transaction."

This appears to be a reference to Gina Rinehart's Hancock Prospecting business effectively acquiring a blocking stake in the company while Albemarle was undertaking its due diligence. With a stake of 19.9%,  a deal would be near impossible to get over the line without Rinehart's approval.

The exit of deep-pocketed Albemarle meant that Liontown would now have to find funding for the Kathleen Valley Lithium Project, which is the reason why its shares are suspended at present.

The complexity of raising funds after a takeover collapse

Normally a couple of days is enough for a capital raising, but this one may be a little more complex than usual.

Liontown's shares have been propped up by the takeover proposal and Rinehart's buying spree during a period of weakness in the lithium industry.

So, working out what is fair value for Liontown's shares now is the tricky part. They were changing hands for as little as $1.50 per share before Albemarle's initial interest was revealed earlier this year.

Will the funds need to be raised at that level? Or will Liontown be able to command a greater price on the back of its M&A appeal?

All should be revealed on Friday when the company expects its shares to return to trade again.

Motley Fool contributor James Mickleboro 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 Scott Phillips.

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