Why has the high-flying Wildcat share price been slammed into a trading halt?

Wildcat's shares are done for the week. Why are they being halted?

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A man on a phone call points his finger, indicating a halt in trading on the ASX share market.

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The Wildcat Resources Ltd (ASX: WC8) share price won't be going anywhere on Thursday.

That's because the high-flying lithium explorer has requested a trading halt this morning.

Why is the Wildcat share price paused from trade?

With the company's shares up 125% since last month and a staggering 4,000% since this time last year, it seems that management feels now is an excellent time to take advantage of its elevated share price by raising funds.

While the information is a touch limited at this stage, the trading halt request does provide investors with a bit of colour.

According to the release, Wildcat is seeking to raise $80 million through the issue of approximately 105.26 million new shares. The company is aiming to undertake this capital raising at 76 cents per new share, which represents an 11.1% discount to where the Wildcat share price last traded.

However, if demand is strong enough, the company may raise as much as $100 million at the same price according to the release. It explains:

The Company requests a trading halt immediately for the purposes of considering, planning and executing a capital raising of approximately A$80 million via the issue of approximately 105.26 million new fully paid ordinary shares in the Company at A$0.76 per share. The Company has the ability to accept oversubscriptions of up to an additional A$20 million at its absolute discretion.

The release doesn't explain what the funds are for. However, it seems likely that the proceeds will be used to support exploration activities at the very exciting Tabba Tabba Lithium Project in Western Australia.

Management recently noted that its drilling activities "confirm that Wildcat is uncovering a Tier-1 lithium deposit at Tabba Tabba."

The company's shares are expected to be out of action until Monday.

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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