Why the Althea (ASX:AGH) share price is sinking 6% lower today

The Althea Group Holdings Ltd (ASX:AGH) share price has come under pressure on Monday. Here's what you need to know…

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Althea Group Holdings Ltd (ASX: AGH) share price has been a poor performer on Monday and has started the week deep in the red.

In afternoon trade the cannabis company's shares are down almost 6% to 40 cents.

Why is the Althea share price under pressure?

This morning the company released an update on the share purchase plan component of its capital raising.

This follows the successful completion of its $6 million institutional placement last week, which was undertaken at 44 cents per new share. The offer price represents a 10.2% discount to its share price at the time of the capital raising announcement.

Today's announcement reveals that the company is pushing ahead with its share purchase plan, with the aim of raising a further $3 million from eligible shareholders.

However, given that the Althea share price is now changing hands for 40 cents, the share purchase plan's offer price of 44 cents per new share isn't looking very attractive at all.

What does this mean?

Althea has already advised where it plans to deploy the funds from the capital raising.

$2 million is going towards sales & marketing activities, a further $2 million is being used to build inventory, $1 million is being used to support its Althea Concierge platform, $3.7 million is being allocated for research & development activities, and $0.3 million is to cover fees.

Given that the capital raising is not being underwritten, there's a real possibility that Althea will now fall short of its target and be forced to scale back its plans.

Though, with the share purchase plan opening today and not closing until 15 January 2021, there is plenty of time for the Althea share price to improve and make the offer more attractive to shareholders. Though, only time will tell if that proves to be the case.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Fallers

dissapointed man at falling share price
Share Fallers

Why Boss Energy, Elsight, Pilbara Minerals, and Whitehaven Coal shares are falling today

These shares are starting the week in the red. But why?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why DroneShield, Gentrack, Metals X, and Northern Star shares are tumbling today

These shares are ending the week in the red. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Bapcor, Boss Energy, Macquarie, and Novonix shares are falling today

These shares are having a tough session on Thursday. But why?

Read more »

Stock market crash concept of young man screaming at laptop on the sofa.
Share Fallers

Guess which ASX 200 stock just crashed 31% on slumping sales

The $1.3 billion ASX 200 stock is getting hammered today.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why CBA, Inghams, Praemium, and Strike Energy shares are tumbling today

These shares are having a tough time on Tuesday. But why?

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Share Fallers

Why Brightstar, Eagers Automotive, Regis Resources, and Westpac shares are sinking

These shares are starting the week in the red. But why?

Read more »

Disappointed man with his head on his hand looking at a falling share price his a laptop.
Share Fallers

Why 29Metals, Atlas Arteria, DroneShield, and Yancoal shares are falling today

Let's see why these shares are ending the week in the red.

Read more »

Shot of a young businesswoman looking stressed out while working in an office.
Share Fallers

Why 29Metals, CAR Group, DroneShield, and Santana Minerals shares are falling today

These shares are missing out on the good times on Thursday. But why?

Read more »