Wellington Drive dives after capital raising plan

Ross Green, chief executive of Wellington Drive Technologies. Photo / Paul Estcourt

Shares in Wellington Drive Technologies lost more than half their value yesterday after the company announced plans for another round of capital raising.

After tumbling 60 per cent during morning trading, the firm's share price recovered during the day to close down 47 per cent, or 3.5c, at 4c last night.

Wellington chief executive Ross Green said the $8.4 million the firm hopes to raise through a rights issue next month would be used to order materials and prepare for a projected increase in production and sales next year.

The company was holding higher than anticipated stock levels - partly due to a major customer deferring deliveries of refrigeration motors - which had a negative impact on available capital.

"We've got to the point now where we firmly believe that it's in the best interests of the company, and the best interests of shareholders, that we raise more capital now,"said Green.

The company's one-for-one renounceable rights offer at an issue price of 1.25 cents a share is a more than 80 per cent discount on the 7.5 cents each share was worth yesterday morning, before the NZX announcement.

Green said: "The rights issue is going to double the number of shares on issue, so pretty clearly that's going to have a significant affect on the perceived value of each individual share."

Wellington's latest capital raising follows the completion of a share purchase plan and institutional placement in September that netted around $7.7 million for the firm.

In September 2009, the company raised $8.5 million through placement of shares with Australia's Hunter Hall Investment Management. Green said reaching the decision to go back to shareholders so soon after the last capital raising had been difficult.

James McDonald, a portfolio manager for Hunter Hall, said in October he hoped the company's September capital raising would be its last.

Green said the impact of its major customer deferring deliveries until next year would be partly offset by increased sales to other companies.

Wellington, which manufactures its motors in China and Singapore, reported a bottom line loss of $6.6 million for the six months to June 30 - an improvement on its $9.9 million loss in the prior comparable period.