Why is the Liontown share price crashing 35% today?

This lithium developer's shares are experiencing a significant de-rating on Friday after returning from suspension.

| More on:
Scared, wide-eyed man in pink t-shirt with hands covering mouth

Image source: Getty Images

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 Liontown Resources Ltd (ASX: LTR) share price has returned from its trading halt with an almighty bang.

In morning trade, the lithium developer's shares are down 35% to $1.82.

Why is the Liontown share price crashing?

There are a number of reasons for the weakness in the Liontown share price today.

The first is of course the collapse of its proposed $3.00 per share takeover by Albemarle Corporation (NYSE: ALB).

The lithium giant pulled the plug on the deal "due to the growing complexities associated with executing the transaction." This appeared to be in reference to Gina Rinehart's Hancock Prospecting business effectively acquiring a blocking stake in Liontown while Albemarle was undertaking its due diligence.

This takeover bid has been keeping the Liontown share price elevated during a period of significant weakness in the lithium industry. So, its removal was always going to put significant pressure on the company's shares.

But that's not the only reason.

What else is weighing on its shares?

Without Albemarle's backing, Liontown has been forced to find funding for its Kathleen Valley Lithium Project alone. This is the reason why its shares were out of action since this week until today.

According to an announcement, the company has now sourced its funding through a debt financing package and fully underwritten equity raising.

In respect to the former, Liontown has signed a commitment letter and credit approved term sheet with a syndicate of leading international and domestic commercial banks and government credit agencies for a $760 million debt funding package.

Management notes that the debt funding is on very attractive commercial terms and includes long-duration project finance facilities and an optional cost overrun/working capital facility.

As for the latter, the company is raising up to $421 million from an equity raising at a sizeable 35.4% discount of $1.80 per new share. This comprises a $376 million fully underwritten institutional placement and a non-underwritten $45 million share purchase plan.

Commenting on the news, Liontown's Managing Director and CEO, Tony Ottaviano, said:

The completion of the Institutional Placement completes the funding package to take Kathleen Valley through to first production and beyond.

Notwithstanding the current challenging market conditions, the Placement was met with strong demand and we have achieved our goal of strengthening our share register with the addition of high-quality domestic and international institutional shareholders.

I am immensely proud that this funding has attracted such positive domestic and international investment and equity market support which, in turn, demonstrates a strong vote of confidence in the Kathleen Valley Project and the Liontown team.

We look forward to getting on with the task of delivering Kathleen Valley on time and on budget with the certainty this funding provides.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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 Scott Phillips.

More on Materials Shares

Man in yellow hard hat looks through binoculars as man in white hard hat stands behind him and points.
Materials Shares

Rio Tinto shares on watch after naming new CEO

The mining giant has found its new leader.

Read more »

Three miners looking at a tablet.
Materials Shares

How much upside does Macquarie project for South32 shares?

The miner faces more headwinds, but the broker maintains its optimism.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Materials Shares

Why are South32 shares sinking 5% today?

Let's see what is weighing heavily on this mining giant's shares today.

Read more »

A male sharemarket analyst sits at his desk looking intently at his laptop with two other monitors next to him showing stock price movements
Materials Shares

How much upside does Macquarie forecast for Pilbara Minerals shares?

Is the broker bullish or bearish on this lithium giant? Let's find out.

Read more »

Group of miners working at a coal mine with one smiling and holding up a piece of coal.
Materials Shares

How much upside does Macquarie project for South32 shares?

Is this miner's luck about to change?

Read more »

A group of miners in hard hats sitting in a mine chatting on a break as ASX coal shares perform well today
Materials Shares

Down but not out: Can these ASX mining shares bounce back?

Here’s what one broker is predicting for Australia’s largest mining companies. 

Read more »

Broker analysing the share price.
Materials Shares

Buy, hold, or sell? Broker's verdict on 3 ASX 200 materials shares

Materials was one of four market sectors that weakened in overall value in FY25.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Materials Shares

Why is this ASX mining stock crashing 14% today?

Let's see what is causing investors to hit the sell button on Monday.

Read more »