Well done for adding "yawn" this time, it adds a bit of variety. Though I'm still waiting for the inevitable "FACEPALM" from you. But I digress; let's return to the topic of the cap raise.
We all understand the necessity of raising capital; after all, as you mentioned it's one of the fundamental purposes of the share market. However, AGY have led many shareholders to believe that a cap raise wouldn't be necessary, given the "fully-funded to 2000 tpa" comments and the expectation that the 10 ktpa expansion would be financed through a prepaid offtake. Some highly respected voices on these threads have been adamant that a cap raise wouldn't be needed. Yet, it's now evident that they're seeking funds from the market, cap-in-hand.
Undoubtedly, all cap raises are bad, as you're well aware. They all dilute shareholder value and are typically executed at a discount to the current share price, which is rarely favourable, at least in the short term. What can make it more palatable/beneficial in the medium to long term is how effectively the raised funds are used to enhance shareholder value. It's crucial for the company not to repeat past mistakes by failing to deliver on the stated outcomes of previous raises, as it severely damages shareholder trust. Unfortunately it appears AGY have done just that, by failing to reach production levels of 2 ktpa before running out of funds.
IMO it's likely you'll see a cap raise of $20-30m, likely at around a 20% discount, within the next three months. It's doubtful that JZ will explicitly state that it's to sustain operations at the 2 ktpa plant; rather, it may be presented as funding for early development work for the 10 ktpa expansion. However, it's highly probable that part of the funds will be allocated to address issues with the existing operation, although the specifics may be obscured through the joint venture structure and described as something like "general working capital" or similar.
Predicting whether a cap raise will ultimately benefit or harm shareholders in the long run is uncertain, but in the short term, it's evident that it will have a negative impact. Keep a close watch on the share price in the days and weeks following the raise for a reality check. The last time AGY raised funds when the share price was at 16 cents, it subsequently plummeted into the 8's, taking six months to recover and breakeven.
Best of luck, and keep an open mind.
AGY Price at posting:
13.0¢ Sentiment: None Disclosure: Not Held
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