Shares of 5E Advanced Materials Inc. (NASDAQ:FEAM) plunged 17.3% in premarket trading on Wednesday after the company disclosed plans to raise up to $30 million through a public offering of common stock.
The specialty materials group has filed offering documents based on an indicative price of $3.44 per share, which reflects the most recent closing price on the Nasdaq Global Select Market. The final pricing, however, will be set by the company in coordination with placement agent Konik Capital Partners LLC and will depend on prevailing market conditions at the time of launch.
5E Advanced Materials cautioned that the eventual offering price could come at a discount to the current trading level. In its preliminary prospectus, the company noted that the referenced market price should not be viewed as a reliable indicator of where the shares will ultimately be priced.
The shares to be issued carry a par value of $0.01 each. The sharp drop in the stock ahead of the opening bell underscores investor concerns about dilution, as issuing new equity increases the total share count and can reduce earnings per share and ownership stakes for existing shareholders.
Such reactions are common around public offerings, particularly when pricing is expected to be below the prevailing market level.