Capital raise sends Novonix shares down 9% before trading halt

The sell-off was sharp before trading ceased.

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Novonix Ltd (ASX: NVX) shares have taken a hit today, sinking sharply before a trading halt was announced midway through the session.

The halt was requested by the company after it responded to an article in The Australian Financial Review. The report said Novonix was about to undertake a capital raising led by Citigroup's equity desk.

Trading was suspended around midday on Wednesday after Novonix shares dropped more than 9% to 64.5 cents apiece.

What led to the drop in Novonix shares?

Novonix shares opened the day on a high. After an initial spike to hit $0.71, investors were swapping the stock between them at around $0.70 apiece until midday.

Then, the rug was pulled. More than $31 million (6 cents per share) was wiped from the company's market capitalisation before shares were put on ice.

"Citigroup's equities desk was wall-crossing investors on Wednesday for a capital raising in lithium ion battery play Novonix, Street Talk can reveal", the opening line read.

The bank had reportedly fostered up support for the capital raise.

The request for a halt in trading came as Novonix responded to the AFR's report. It denied it was raising cash. At least for now. It said:

Novonix refers to an article in the Street Talk section on the Australian Financial Review's
website speculating that Novonix will undertake a capital raising.

Novonix confirms that no decision has been made to undertake a capital raising…

Novonix has requested the halt remain in place until Friday, June 7, or until it makes an earlier announcement. There is no evidence to suggest it will or won't make an announcement before Friday.

The company last completed a raise of equity capital at $2.90 per share. At the time of the trading halt on Wednesday, Novonix shares traded more than 77% lower than this mark.

Following today's report, investors will likely be watching the Novonix story very closely in the coming days.

What's next for Novonix?

In May, Novonix revealed that Hatch, a global engineering and consulting firm, completed an independent assessment of its Riverside production facility in the US.

As my colleague James reported, when the facility reaches its target output, it is expected to run on operating margins of 23%–30%.

As a positive, the company is reportedly on track to achieve its initial targets at Riverside by the end of 2024. This is 3,000 tonnes per annum (tpa), with plans to scale up to 20,000 tpa.

Novonix shares have had a difficult time in 2024, down 12.84%. During the past year, they have fallen 31.38%.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Zach Bristow 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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