Key points:
- TomCo Energy shares plunged 14.9% on convertible loan drawdown.
- The company drew down the final loan tranche worth £375,000 today.
- Inventors reacted negatively to the news. Read on to find out why.
The TomCo Energy Plc (LON: TOM) share price plunged 14.9% after revealing that it had initiated the second and final drawdown of the £750,000 unsecured convertible loan note facility unveiled on 1 September 2022.
The oil development group noted that the tranche worth £375,000 would help finance its operations until it secures a much large debt facility to fund the development of its Greenfield and the Tar Sands Holdings II LLC (TSHII) site.
Also read: Oil Trading Guide – How To Trade Oil.
Investors were unhappy with the idea of the company pursuing further debts, which weighed heavily on their sentiment towards the oil company. The oil firm clearly stated that it needs more capital to continue operating and developing its assets despite taking out a loan.
TomCo Energy told investors that it had already received a conversion notice from some investors who had subscribed to the convertible loan notes worth £200,000 principal from the first tranche, including £10,000 in interest.
The conversion notice resulted in the issuance of over 59.67 million new shares priced at 0.3519p each, triggering the selloff as investors sold their shares to bring prices to near parity with the newly issued shares.
The terms of the convertible loans require that the new shares be sold at a 15% discount to the prevailing price over the past 15 days or at 0.75p if the price is higher than 0.75p, which would still represent a discount.
It remains to be seen how TomCo Energy shares will behave going forward as the company seeks further funding to develop its promising Greenfield and Tar Sands Holdings II LLC sites. Meanwhile, investor sentiment towards the company remains decidedly bearish.
However, if the oil development company quickly secures additional funding, things could change.
*This is not investment advice.
TomCo Energy share price.
TomCo Energy’s share price plunged 14.94% to trade at 0.404p, falling from Friday’s closing price of 0.475p.