Johannesburg - Lonmin [JSE:LON] sank to a record low for a second day as investors fled after the third-biggest platinum producer said it would sell billions of shares at a fraction of the market price.
The stock dropped as much as 28% in London to 9.5 pence, an all-time low. It fell 38% in Johannesburg, the largest decline ever for Lonmin’s secondary listing.
The collapse has accelerated since November 2, with the stock down more than 15% in London in each of the past four days and sinking 18% on Monday as Lonmin said it would offer $407m of shares at a 94% discount to the prior market close. The rights offer is part of efforts to fend off an existential threat from sinking metals prices.
Lonmin has attracted many speculative buyers over the length of a 94% slump in its value this year and as Glencore [JSE:GLN] offloaded its almost quarter stake in the producer, said Rene Hochreiter, an analyst at Noah Capital Markets in Johannesburg.
“You can expect a lot of volatility until” the rights issue closes on December 10, he said. “The weak holders will be out and the guys who are going to follow their rights will be in.”
Lonmin is cutting costs and jobs, and closing shafts to try to weather a drop by more than half in platinum prices since a high in August 2011. While shareholders are facing a deep discount to maintain their stakes in the company, three banks including HSBC Holdings guaranteed the share sale that aims to unlock new financing for the metals producer.
“It all depends on whether the new business plan comes together,” Hochreiter said. “If it doesn’t, then you’re going to get volatility again.”