14th Jul 2016 08:43
LONDON (Alliance News) - Vast Resources PLC Thursday said it will launch an open offer to shareholders as it cannot raise adequate funds under the terms of the placing that was recently completed and to ensure existing investors can participate in the much-needed fundraising.
Shareholders rejected a proposal tabled by the company to increase the limit on its authority to issue shares to Crede Capital to facilitate the third tranche of funds that Vast was hoping to access because the terms were "too onerous", according to Vast. But the company still needs an "urgent injection" of cash to "maintain momentum".
Under a deal signed in January, Crede agreed to subscribe for new shares and warrants to raise less than AUD5.0 million. The subscription price was to be the closing bid price on the trading day prior to the date of subscription.
The first of a maximum of four tranches was issued in the same month but the second tranche was not issued because it would have given Crede over a 25% stake in the business, which would have breached the company's rules.
Due to a fall in its share price, Vast's existing authority has not be enough to allow it to issue third tranche shares and warrants to Crede. Under its subscription agreement, Vast is obliged to seek further authority to do so.
Vast said it "found support" from shareholders at a price of 0.285 pence, implying shareholders believe that is the price at which shares should be issued to Crede, but that meant Vast could only raise GBP855,000 from the third tranche because it could only issue a maximum of 300.0 million shares in the business.
Notably, it said, the support for that price was received from a number of shareholders who voted down the Crede offer.
On Thursday, Vast said it will launch an open offer to allow the company to raise more funds and because of previous complaints from shareholders about past fundraisings.
"We will need further funding to allow the company to fulfil its development programme, and in the past shareholders who have not had the chance to subscribe for placings have felt aggrieved and have complained to us. The directors felt, therefore, that we have an obligation to make an open offer to shareholders on the same terms as the placing," said the company.
However, Vast is concerned that the 0.285 pence price supported by shareholders could mean the offer is not "enthusiastically supported" because of the decline in the company's share price.
Vast shares were down 3.5% to 0.251 pence on Thursday morning. Shares last touched 0.285p on Tuesday.
The supported price of 0.285 pence is significantly higher than the close on June 15, when Vast originally asked shareholders to grant authority to issue more shares, closing at 0.195 pence.
Overall, shares are down more than 68% since the start of 2016 and over 80% lower than what they were trading at one year ago. Their 52-week high was 2.29p.
"In the meantime, in the expectation that we would be coming to the market for more funds, the price of our shares has been in decline so that 0.285p does not now represent an attractive discount, although the warrants attached to them will appeal to some shareholders," said Vast.
"The open offer might not, therefore, be enthusiastically supported. However, the attraction for the company remains that it opens the way for us to seek shareholder permission to issue more shares to fund the company's development," the company added.
Vast envisages raising GBP1.0 million from the open offer of up to 350.9 million new shares at that 0.285p price. The offer will be based on 12,212 shares for every 100,000 shares held.
Following that recent placing, Vast has 2.87 billion shares in issue. If all of the open offer shares are taken up, then they would represent around 10.9% of the enlarged issued share capital. The shares issued under the recent placing were equal to a 10.4% stake in the enlarged issued share capital.
Vast said it will ensure that the market and shareholders are made more aware of the company's prospects going forward and said, in time, it can "raise funds whilst ensuring current shareholders do not suffer the levels of dilution suffered in recent months".
"We want to reiterate that the company has a portfolio of assets that are capable of generating significant shareholder value and our immediate aim is to unlock that value and move forward constructively with the help of our shareholders," said Vast.
By Joshua Warner; [email protected]; @JoshAlliance
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