Hastings Tech Metals shares tumble post $110m cap raise: What's next?

Hastings Technology Metals (ASX: HAS) shares tumbled tumbled -17.7% as the market opened - a decline that's in-line with the 18.8% discount applied to the company's successful $110m capital raise to accelerate the development of its Yangibana Rare Earths Project in WA.

"Despite soft market sentiments, the strong demand shown from both Australian and international institutional investors in this Placement is testament to the world class nature of the Yangibana project," said Hastings' Executive Chairman, Charles Lew.

Lew said Yangibana is on track for commissioning in mid-2024.

You can read more about the capital raise and use of proceeds here.

How does the capital raise impact share price performance?

Hastings' capital raise was a rather sizeable one, representing approximately 22.4% of its existing shares on issue.

Much like a stock going ex-dividend, shares typically open somewhere around the capital raise price.

Although, there are some rare instances where a bullish raise for initiatives such as an accretive acquisition, geographic expansion etc. can outweigh the effect of new, heavily discounted shares.

Case study: Arafura Resources

Another emerging rare earths player, of a similar market cap, Arafura Resources (ASX: ARU) raised $41.5m at a 26.5 cents per new share, a 17.2% discount to its pre-raise price on 5 August.

On that day:

• Open: -15.6%

• Low: -18.75%

• Close: -14.1%

Arafura would chop around the high 20s and low 30s for the next 3-4 weeks. It experienced a brief thrust to 32 cents on 31 August but fell back into its trading range just two days later.

Arafura share price chart (Source: TradingView, Annotations by Market Index)

It wasn't until 5 September that the stock would break out of that trading range with conviction and volume, closing at session highs of 34 cents, up 11.5%.

The main takeaway is that patience is needed post capital raise as the stock digests the supply of new, discounted shares.

That isn't to say Hastings will ping pong back and forth for a few weeks and then break out. But watching how it trades around the raise price will be key.