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Novagold was clobbered on Thursday after it added almost 10 million shares to its bought deal offering.
The explorer whose main asset is a JV with Barrick in Alaska increased the offer to $332 million but sold to institutions at $9.50/share, 8% below the closing price yesterday.
Retail investors duly marked the stock down and during the firs half hour of trade Novagold, listed in Toronto and New York, lost more than 11% to $9.19. The company is worth $2.3 billion on the TSX.
To make matter worse Novagold let the door open for the underwriters, RBC Capital Markets and JP Morgan Securities, to exercise and over-allotment option for an additional 5.25 million shares at the same discount price, further diluting the share pool.
Including the option, more than 40 million new shares in Novagold will be listed. At the moment it has 240 million shares in circulation. The offer is expected to close by Tuesday next week.
Apart from the 50-50 Alaska JV with Barrick, which the company says is one of the world’s largest known undeveloped gold deposits, Novagold has a similar arrangements with Teck on Galore Creek in British Columbia, a copper-gold-silver deposit. NovaGold, through wholly-owned subsidiary, NovaCopper also owns a 100% interest in the Ambler copper-zinc-gold-silver deposit in northern Alaska and has other earlier-stage exploration properties.
