Pharmaceutical company Chemeq has joined gold producer Siberia Mining and technology company ERG as prominent Western Australian companies to suffer a major shortfall on their capital raising plans.
Pharmaceutical company Chemeq has joined gold producer Siberia Mining and technology company ERG as prominent Western Australian companies to suffer a major shortfall on their capital raising plans.
Chemeq has announced that shareholders subscribed to just 26 per cent of their entitlements under the company’s $20.3 million rights issue.
The magnitude of the shortfall was exaggerated by the decision of Chemeq chairman and major shareholder, Graham Melrose, to not subscribe for any of his entitlements under the offer.
Instead, Dr Melrose will take up all of his shares as a sub-underwriter.
Adjusting for this, the company said the actual shortfall in practical terms was 49 per cent.
The shortfall was not surprising given the fall in Chemeq’s share price to about $1.80, well below the $2.40 pricing of the rights issue.
It will be offered to the underwriter Ord Minnett and its sub-underwriters.
Dr Melrose has agreed to sub-underwrite the rights issue up to a value of $6.5 million, which is $1.2 million above his entitlement.
The large shortfall in the rights issue is the latest in a litany of woes to beset Chemeq, which has reported unexpected cost increases at its Rockingham manufacturing plant and failed to deliver firm sales of its animal health drug.
Siberia Mining also suffered a large shortfall on its recent $4 million rights issue.
Shareholders subscribed for 7.2 million shares, or 40 per cent of the shares on offer, leaving underwriter Patersons Securities and its sub-underwriters, including Siberia chairman Andrew Forrest and managing director Jonathan Downes, to pick up the residual shares.
Mr Forrest outlaid $176,000 to acquire an extra 814,116 shares, comprising his entitlement under the rights issue (600,000 shares) and his sub-underwriting commitment (214,116 shares).
Mr Forrest also advised the Australian Stock Exchange that he disposed of 520,000 Siberia shares for nil consideration.
Mr Downes outlaid $112,000 to acquire 516,000 Siberia shares, comprising a mix of on-market trades, his entitlement under the rights issue and his sub-underwriting commitment.
The lack of support for Siberia’s rights issue contrasts with its success with two earlier share placements.
Last November the company raised $2.1 million at 43.75 cents per share, and last December it raised $1.5 million at 50 cents per share.
ERG shareholders subscribed for 88 per cent of their entitlements in the automated ticketing company’s recent $67 million rights issue.
It was also underwritten by Patersons Securities.