The Select Harvests Ltd (ASX: SHV) share price is starting the week deep in the red.
In morning trade, the ASX 300 stock is down over 18% to $3.67.
The catalyst for this decline has been the almond producer completing the institutional component of its equity raising.
According to the release, the fully underwritten institutional placement and the institutional component of the fully underwritten 1 for 9.2 accelerated non-renounceable entitlement offer raised approximately $61.7 million.
The institutional placement raised approximately $30 million through the issue of approximately 7.9 million new shares at the offer price of $3.80 per new share. This represents a 15.5% discount to where the ASX 300 stock ended last week. Whereas the institutional entitlement offer raised approximately $31.7 million at the same price, resulting in approximately 8.4 million new shares being issued.
Management advised that there was significant demand received from both existing and new shareholders. This saw institutional shareholders take up approximately 72% of their entitlements. New shares not taken up by eligible institutional shareholders and entitlements of ineligible institutional shareholders were sold at the offer price to other institutional shareholders and investors.
But Select Harvests isn't stopping there. The retail component of the equity raising, which is also fully underwritten, is expected to raise approximately $18.3 million. This will take the expected total size of the equity raising to approximately $80 million.
The proceeds from the equity raising will be applied towards the repayment of debt and provision of facility headroom ($71.6 million), capital investment to increase processing capacity ($5 million), and associated transaction costs ($3.4 million).
The former will allow the ASX 300 stock to navigate the operating challenges it is currently experiencing. Its CEO, David Surveyor, said:
The market conditions resulting from the lower than forecast California almond production, low carry-in and declining bearing acres in California are improving the price with the forecast 2024 crop to be in the range of $7.70/kg – $7.75/kg.
Whilst there is much more to do, the strategic initiatives and cost reductions resulting from the Company's initiatives are expected to deliver a significantly better financial result than FY23. The logistics issue whilst transitory in nature will increase full year debt and has highlighted the prudence in undertaking a capital raise. The Company will use the funds from this raise to retire debt and progress the business strategy. We remain focused on growing, processing and selling almonds as efficiently as possible.
The Select Harvests share price remains up 25% year to date despite today's decline.
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