This story has been updated to include new quotes, stock prices
Two days after the stock of Montreal specialty metals company 5N Plus Inc. popped 8 per cent on steady results, the stock has more than given back those gains in heavy trading Thursday after the company announced a $40-million bought deal that will dilute the stock by 18 per cent.
5N Plus stock tumbled 14.8 per cent in heavy trading to close at an all-time low $2.82 after announcing late Wednesday it was selling 12.9 million units - good for one share and a warrant to buy 5N Plus stock for $5 any time in the next 24 months - at $3.10 each. A syndicate of investment banks led by National Bank Financial has agreed to buy 6.45 million of the units, while Quebec's investment arm, Investissement Quebec, has agreed to buy almost the same amount for the same price.
Asked why the stock was off so sharply, chief executive Jacques L'Ecuyer said "I'm not sure I have a good answer." While the market was down broadly, "I suspect some of our existing shareholders were not in complete agreement with our strategy here."
The company issued stock near historic lows in order to reduce its debt, after trimming its indebtedness in the first quarter ended March 31 to $233-million from $261-million three months earlier. "We want to be in a position to strengthen our balance sheet," said Mr. L'Ecuyer. "We believe there is some uncertainty from a macroeconomic standpoint," particularly in Europe, which accounts for about half the company's sales. "Reducing debt for us is key" in the circumstances.
"When you're offered money to alleviate your debt situation, it's prudent to accept it," said Versant Partners analyst Massimo Fiore. "It helps their flexibility a lot" by reducing total debt by about 15 per cent
5N Plus announced first-quarter results late Monday that were roughly in line with expectations, earning adjusted earnings per share of 10 cents on revenue of $162.2-million in the period ended March 31. The company also held its annual meeting Thursday morning.
5N Plus stock is more than 40 per cent lower than levels from two months ago, when the company, which purifies and sells metals such as germanium and gallium derived as byproducts of industrial processes, announced its first-ever quarterly loss on weak demand. The company has also been hit by uncertainty after its largest customer, solar panel maker First Solar Inc., restructured amid declining demand for its products.
5N Plus transformed its business last year when it bought MCP Group SA, a Belgium-based company, a major supplier of specialty metals used for a range of applications including stomach remedies. The $317-million deal substantially reduced the company's overwhelming dependence on the solar industry, which is now about 15 per cent of its business.