LONDON (Alliance News) - Struggling platinum miner Lonmin PLC saw its shares take another hammering on Friday as it completed its 1-for-100 share consolidation after a heavily discounted and costly rights issue almost doubled its share capital.
Lonmin shares were trading down 12% to 61.50 pence per share on Friday afternoon, having earlier hit a low of 55.00p.
Lonmin completed a 46-for-1 rights issue earlier this month which was heavily discounted at only 1.0 pence per share, 94% less than Lonmin's closing price the day before the rights issue was announced.
The rights issue saw a disappointing take-up, with only 70% of the shares available being purchased by shareholders. However it was fully underwritten.
One possible reason for the lack of appetite were notes released by analysts that warned Lonmin would likely go back to the market over the next three years, forcing shareholders to continually invest in the company to retain their stakes.
The underwriters, HSBC, JP Morgan Cazenove and Standard Bank, were given a matter of days to find buyers for the 7.84 billion shares that were not taken, or faced having to purchase them themselves.
The underwriters managed to find buyers for 6.81 billion of those shares after existing shareholder Public Investment Corp of South Africa upped its stake to 29.99% from only 7%, a touch under the 30% threshold. However, the banks had to subscribe to the other 1.03 billion shares that nobody wanted.
That meant Lonmin secured a much-needed USD407.0 million in proceeds, but the company came under criticism from some analysts because USD38.0 million was swallowed up in costs, meaning the company only secured USD369.0 million in net proceeds.
Alongside the heavily discounted issue price, the new shares issued under the rights issue increased Lonmin's share capital by a staggering 98% to 28.20 billion shares, leading the company to consolidate its shares.
Lonmin has now completed the 100:1 share consolidation, meaning its share capital has fallen to 282.0 million shares.
Lonmin shares closed at 0.7 pence per share on Thursday. Following the share consolidation, the value of each share multiplied by 100, meaning that closing share price was equivalent to 70.0 pence per share, compared to the current price of 61.50p.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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