The Scotgold Resources Ltd (LON: SGZ) share price plunged 32% after it conditionally raised £2.5 million (US$3.05 million) via an accelerated book build where it sold each new ordinary share at 40p. An adverse investor reaction was expected, given the discounted price offered to the participating investors.
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The company noted that seven directors and a leading shareholder participated in the book build and bought 1,435,000 Subscription Shares worth £574,000 (US$700,280). Their participation shows their commitment to the company and confidence in its prospects, given that they were willing to invest their funds in the firm.
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Scotgold will issue 6,250,000 new shares representing about 9.48% of the company’s enlarged share capital. The company also noted that it had announced a separate retail offer to raise £500,000, where it wanted to sell 1,250,000 new shares at the same price. The company promised to release the results of the retail offer on 16 February 2023.
However, investors completely ignored a key highlight of today’s release: the deferral of Scotgold’s debt repayments worth £2.5 million to Bridge Barn Limited, which were due in 2023. Bridge Barn agreed to defer the payments by up to nine months from the due date.
The deferral option is a massive win for Scotgold since it can use the funds that could have repaid the Bridge Barn loan for further exploration at its Cononish project and the wider Grampians area. Yet, this fact was lost on investors as they focused on the capital raise.
Scotgold did not specify how it intends to use the funds raised via the accelerated book build and retail offer. Still, we can assume that the monies will fund its exploration projects, be used for general corporate purposes, and boost its cash balances.
Investors eagerly await the retail offer’s results and further clarification on how Scotgold plans to use the funds raised. Still, many would like to see Scotgold shares rebound from their current lows.
*This is not investment advice.
Scotgold Resources’ share price.
The Scotgold Resources share price plunged 32.06% to trade at 39.40p, from Thursday’s closing price of 58.00p.
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