Potash company Karnalyte Resources has withdrawn its $115-million bought deal after discussions with securities regulators delayed the filing of its final short-form prospectus.
On Wednesday the Calgary-based company publicly announced that regulators had questions about its latest reserve and resource estimate. Answering these created a delay, and that meant "a final short form prospectus could not be filed in the required time frame."
Behind the scenes, there may be some relief that the underwriters have an out. At $115-million, the common share offering, led by BMO Nesbit Burns, is about 45 per cent of the company's current market capitalization. A hefty amount, for sure, and that put pressure on the stock. Before the market opened on Wednesday, the shares were down 13 per cent since the deal was announced.
On top of that, the stock dropped 19 per cent in the month leading up to the financing. With such a rough performance, word is that the deal wasn't flying off the shelves. Now that it's been withdrawn for regulatory reasons, the underwriters have caught a break.
Karnalyte intended to use the offering's proceeds for construction of the initial phase of its Wynyard Carnallite Project .
Tim Kiladze