The Public Investment Corporation (PIC) will invest a further R360m in Efora Energy as part of the company’s R600m capital-raising effort in order to repay a loan and fund operations and expansion.
When raised, the total capital would be three times the size of the company’s current market value of R200m.
The Efora Energy (formerly SacOil) share price fell as much as 22% — from R0.52 to R0.41 — on the news.
The stock has declined almost 65% over the past six months and 80% over the past five years.
A spokesman for Efora, Ben Romney, said the funds would be used to repay the loan for the AfricOil transaction, provide working capital for existing operations, and consider new opportunities in line with Efora’s growth strategy.
Romney said the rights issue had been well flagged to shareholders. “Share prices tend to drop on rights issues due to dilution. Also, fund raisers of that nature are normally done at a discount to existing price,” Romney said.
Efora announced on Tuesday it would take a proposed rights offer — a mechanism to raise funds — to its shareholders and said the PIC, with a 60.72% shareholding, had committed to follow its rights.
The company said it would offer 1.2-billion ordinary shares to shareholders at R0.50 per share. In line with its shareholding, the PIC — the investment arm and asset manager of the Government Employees Pension Fund — would have rights to more than 720-million shares with an implicit cost of more than R360m.
The PIC’s original investment in Efora, then SacOil, was R75m and the subject of the corporation’s own independent forensic investigation.
For the year ended February, Efora made a loss of R176m, against R2.6bn in revenue.
The company only has one operation that produces oil, currently at a loss, in Egypt.