SQX secures full $2.468 million as underwriters absorb offer shortfall
SQX Resources has raised $2.468 million before costs through a fully underwritten entitlement offer, with most new shares to be issued to the underwriter and sub-underwriters. The capital will fund exploration across its US and Queensland projects, but the deal will also expand the share count by almost 37.5%.
- $2.468 million raised before costs through a 2-for-3 offer
- Eligible shareholders took up 37.5% of the shares offered
- 37.5 million shortfall shares due to underwriters on 22 September
- Directors subscribed for entitlements and 2.3 million shortfall shares
- 12.34 million unquoted options to be issued to the underwriter
Underwriter absorbs most of the shortfall
SQX Resources Limited (ASX:SQX) has secured the full $2.468 million targeted under its 2-for-3 non-renounceable entitlement offer, but eligible shareholders subscribed for only 24,184,086 of the 61,700,000 new shares available. That equates to roughly 37.5% of the offer, leaving the underwriter and its sub-underwriters to take up 37,515,914 shortfall shares worth $1.501 million.
The shareholder applications comprised $926,246 of entitlements and a further $41,117 under the shortfall facility. Those 24.18 million shares were issued on 21 September and are expected to begin trading on a normal settlement basis on 22 September. The remaining shortfall shares are also expected to be issued on that date, completing the fully underwritten raising.
The structure removes the immediate risk that the offer would fall short of its headline target, although it leaves a sizeable portion of the new equity in the hands of the underwriting group and sub-underwriters. Once completed, SQX's ordinary share count will rise from 116,734,086 after today's issue to 154,250,000.
Directors commit capital as exploration takes priority
Each director with an entitlement took it up in full, receiving 5,965,829 new shares worth $238,633 in aggregate. Directors or their nominated entities will also receive 2,300,000 shortfall shares worth $92,000 through commitments to sub-underwrite the offer, with the company saying the allocations reflect those commitments.
SQX said the funds will support exploration at the Red Bird project in Arizona, the Williams Gold-Silver project in Montana and the Ollenburgs project in Queensland. They will also cover assessment of new projects, working capital and offer costs. The company has described Red Bird and Williams as its immediate exploration focus, but the announcement does not provide a spending timetable or quantify the exploration outcomes the new capital is expected to produce.
Options add another layer to the capital structure
As consideration for the underwriting, SQX has agreed to issue the underwriter or its nominees 12,340,000 unquoted options. Each option carries a $0.10 exercise price and expires three years after issue. They do not form part of the current share count, but could add to the company's issued equity if exercised.
The next mechanical milestone is the issue and quotation of the 37.5 million shortfall shares. After that, the more consequential test will be whether the additional capital translates into measurable exploration progress at Red Bird, Williams and Ollenburgs before the enlarged register and underwriting-related options become the dominant features of the funding story.
Bottom Line?
The raising gives SQX its full $2.468 million, but the investment case now turns on exploration delivery against a substantially expanded share count.
Questions in the middle?
- Will the shortfall shares be issued and quoted as expected on 22 September?
- How quickly will SQX deploy the new capital across Red Bird, Williams and Ollenburgs?
- Will exploration results justify the dilution created by the raising and the 12.34 million underwriting options?
