Why is the Liontown share price crashing 35% today?

This lithium developer's shares are experiencing a significant de-rating on Friday after returning from suspension.

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The Liontown Resources Ltd (ASX: LTR) share price has returned from its trading halt with an almighty bang.

In morning trade, the lithium developer's shares are down 35% to $1.82.

Why is the Liontown share price crashing?

There are a number of reasons for the weakness in the Liontown share price today.

The first is of course the collapse of its proposed $3.00 per share takeover by Albemarle Corporation (NYSE: ALB).

The lithium giant pulled the plug on the deal "due to the growing complexities associated with executing the transaction." This appeared to be in reference to Gina Rinehart's Hancock Prospecting business effectively acquiring a blocking stake in Liontown while Albemarle was undertaking its due diligence.

This takeover bid has been keeping the Liontown share price elevated during a period of significant weakness in the lithium industry. So, its removal was always going to put significant pressure on the company's shares.

But that's not the only reason.

What else is weighing on its shares?

Without Albemarle's backing, Liontown has been forced to find funding for its Kathleen Valley Lithium Project alone. This is the reason why its shares were out of action since this week until today.

According to an announcement, the company has now sourced its funding through a debt financing package and fully underwritten equity raising.

In respect to the former, Liontown has signed a commitment letter and credit approved term sheet with a syndicate of leading international and domestic commercial banks and government credit agencies for a $760 million debt funding package.

Management notes that the debt funding is on very attractive commercial terms and includes long-duration project finance facilities and an optional cost overrun/working capital facility.

As for the latter, the company is raising up to $421 million from an equity raising at a sizeable 35.4% discount of $1.80 per new share. This comprises a $376 million fully underwritten institutional placement and a non-underwritten $45 million share purchase plan.

Commenting on the news, Liontown's Managing Director and CEO, Tony Ottaviano, said:

The completion of the Institutional Placement completes the funding package to take Kathleen Valley through to first production and beyond.

Notwithstanding the current challenging market conditions, the Placement was met with strong demand and we have achieved our goal of strengthening our share register with the addition of high-quality domestic and international institutional shareholders.

I am immensely proud that this funding has attracted such positive domestic and international investment and equity market support which, in turn, demonstrates a strong vote of confidence in the Kathleen Valley Project and the Liontown team.

We look forward to getting on with the task of delivering Kathleen Valley on time and on budget with the certainty this funding provides.

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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