Surface Transforms plc (LON:SCE), manufacturers of carbon fibre reinforced ceramic automotive brake discs, has announced that it proposes to raise approximately £0.8 million (before expenses) by means of a Firm Placing and Subscription, and a further £5.7 million (before expenses) by means of a Conditional Placing, with a total 650,000,000 New Ordinary Shares at 1 pence per New Ordinary Share. In addition to the Placing and Subscription, the Company proposes to raise up to a further £2.0 million (before expenses), subject to the Board’s discretion to increase the size of the Open Offer, by way of an Open Offer.
The net proceeds from the Placing and Subscription will be used for immediate working capital requirements, both in terms of existing operations, but also the Phase 2 and manufacturing scale-up. Any excess raised pursuant to the Open Offer will provide additional working capital headroom.
The Placing will be conducted by way of an accelerated bookbuild which will be launched immediately following this Announcement, in accordance with the terms and conditions set out in the Appendix to this Announcement.
The Firm Placing will be effected by way of a cashbox placing of new Ordinary Shares for non-cash consideration, further details of which are set out below. The cashbox placing structure is being used due to the Issue Price being at a substantial discount, which would otherwise limit the net proceeds receivable by the Company given the existing allotment authorities available to the Board for issuing Ordinary Shares on a non-pre-emptive basis.
KEY HIGHLIGHTS
· Proposed Placing of approximately £6.3 million (before expenses) with institutional investors, proposed Subscription of £0.2 million by the Directors (before expenses) and certain PDMRs and proposed Open Offer of up to £2.0 million (before expenses), subject to the Board’s discretion to increase the size of the Open Offer, to existing Qualifying Shareholders, in each case at the Issue Price.
· The Company intends to use the net proceeds of the proposed Fundraise for working capital requirements and to support existing operations and the manufacturing scale-up
· The Issue Price represents a discount of approximately 66 per cent. to the closing mid-market price of 2.9 pence per Ordinary Share on 30 April 2024, being the last Business Day prior to the date of this Announcement.
· Zeus is acting as Nominated Adviser and Joint Broker to the Company and Cavendish is acting as Joint Broker to the Company in connection with the Fundraise.
· Completion of the Conditional Placing is subject to, inter alia, the Resolutions being passed at a General Meeting of the Company, expected to be held at 11.00 a.m. on 23 May 2024.
The timing for the close of the Bookbuild and allocation of the Placing Shares shall be at the absolute discretion of the Joint Brokers, in consultation with the Company. The allocation of the Placing Shares between First Admission and Second Admission shall be at the absolute discretion of the Joint Brokers, in consultation with the Company. The final number of Placing Shares to be issued pursuant to the Placing will be agreed by the Joint Brokers and the Company at the close of the Bookbuild. The result of the Placing will be announced as soon as practicable thereafter. The Placing is not underwritten.
In addition, the Directors and certain PDMRs have indicated an intention to participate in the Fundraising (by way of a direct Subscription for Subscription Shares) as follows:
| Director | Intended Subscription | Number of Subscription Shares |
| Matthew Taylor | £100,000 | 10,000,000 |
| David Bundred | £25,000 | 2,500,000 |
| Kevin Johnson | £25,000 | 2,500,000 |
| Ian Cleminson | £25,000 | 2,500,000 |
| Julia Woodhouse | £25,000 | 2,500,000 |
| Isabelle Maddock | £3,500 | 350,000 |
| Stephen Easton1 | £15,000 | 1,500,000 |
1Stephen Easton is the non-Board Chief Operating Officer and a PDMR of the Company
In addition to the Placing and Subscription, the Company intends to provide all Qualifying Shareholders with the opportunity to subscribe for an aggregate of 200,000,000 Open Offer Shares at the Issue Price of 1 pence per Open Offer Share to raise up to approximately £2.0 million (before expenses), subject to the Board’s discretion to increase the size of the Open Offer. Qualifying Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares through an excess application facility. The Open Offer is not underwritten.
The issue of the Firm Placing Shares and the Subscription Shares are conditional, inter alia¸ on the Firm Placing Admission. The issue of the Conditional Placing Shares and the Open Offer Shares are conditional, inter alia, the passing by Shareholders of the Resolutions at the General Meeting of the Company, expected to be held at 11.00 a.m. on 23 May 2024.
Shareholders should note that the Conditional Placing and Open Offer are conditional, inter alia, on the passing of the Resolutions. Failure to approve the Resolutions would therefore prevent the Company from raising funds pursuant to the Conditional Placing and Open Offer, and only part of the net proceeds would be received by the Company. This would require the Company to seek urgent alternate financing that may or may not be available and, if available, may or may not be on worse terms than the Fundraising. The Directors believe that the Resolutions to be proposed at the General Meeting are in the best interests of the Company and Shareholders as a whole and unanimously recommend that Shareholders vote in favour of the Resolutions.
A circular containing further details of the Placing, the Subscription and the Open Offer, Notice of General Meeting, proxy form and Application Form will be despatched to Shareholders following announcement of the result of the Placing and Subscription and will thereafter be available on the Company’s website at www.surfacetransforms.com.
Applications will be made to the London Stock Exchange for the admission of the Firm and Conditional Placing Shares, Subscription Shares and Open Offer Shares to be admitted to trading on AIM. Admission of the Firm Placing Shares and the Subscription Shares is expected to commence at 8.00 a.m. on 7 May 2024 and admission of the Conditional Placing at 8.00 am on 24 May 2024 and the Open Offer Shares at 8.00 am on 28 May 2024.
The New Ordinary Shares, when issued, will be fully paid and will rank pari passu in all respects with the Existing Ordinary Shares.
