On Friday, HSBC maintained its Hold rating on Lithium Americas Corp. (NYSE:LAC:CN) (NYSE: LAC) but reduced the price target from Cdn$6.50 to Cdn$5.10. The adjustment follows the company's announcement of a highly dilutive equity offering, which is expected to raise approximately USD275 million, representing 34% of the outstanding shares.
The capital raised from this equity offering is intended to unlock the second tranche of funding from General Motors (NYSE:GM). In addition to this equity offering, Lithium Americas is seeking to secure an additional USD165 million through alternative financing methods to support its working capital requirements.
The revised price target reflects the impact of the dilution and alterations to the company’s capital structure. HSBC's analyst noted the changes have led to an increase in the weighted average cost of capital (WACC) to 9.3%, up from the previous 9.0%.
The equity offering and the search for alternative financing are part of Lithium Americas' broader strategy to strengthen its financial position. The company is navigating through a period of expansion and development, which necessitates significant capital.
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