GSS Energy Announces Rights Issue to Raise Up to S\$7.9 Million

GSS Energy Limited has announced a significant capital-raising initiative through a proposed renounceable non-underwritten rights issue of up to 607,222,761 new ordinary shares. The issue price has been set at S\$0.013 per Rights Share, representing a substantial discount of approximately 55.2% to the volume-weighted average price (VWAP) of S\$0.030 and the closing price of S\$0.029 on October 22, 2024.

Key Details of the Rights Issue

• Allotment Ratio: Nine (9) Rights Shares for every ten (10) existing ordinary shares held by entitled shareholders as of the record date.
• Fundraising Goal: Up to S\$7.9 million in gross proceeds under the maximum subscription scenario.
• Use of Proceeds: The funds will be allocated towards partial repayment of a shareholder loan, working capital purposes, and business expansion.
• Non-Underwritten: The rights issue will not be underwritten, saving the company costs typically associated with underwriting fees.

Financial Impact and Rationale

The primary purpose of the rights issue is to strengthen GSS Energy’s financial position. A portion of the proceeds will be used to partially repay an interest-bearing shareholder loan extended by Mr. Sydney Yeung Kin Bond, the company’s Director and controlling shareholder. This loan amounts to approximately S\$1.92 million, including interest. Under the maximum subscription scenario, 14.4% of the proceeds will go towards this repayment, while the remaining funds will bolster working capital and support business expansion.

Mr. Yeung, through his entity Roots Capital Limited, has committed to subscribing to his pro-rata entitlement of 85,800,150 Rights Shares, valued at S\$1,115,402. This demonstrates his confidence in the company’s prospects. Additionally, a portion of his subscription amount under the rights issue will be offset against the outstanding loan balance.

Shareholder Considerations

• Eligibility: Only entitled shareholders with registered addresses in Singapore or those who provide a Singapore address at least three market days before the record date will be eligible to participate.
• Foreign Shareholders: Rights Shares will not be offered to shareholders with addresses outside Singapore due to regulatory constraints. However, arrangements may be made to sell the provisional allotments for foreign shareholders, with net proceeds distributed accordingly.
• Subscription Options: Shareholders can accept, decline, renounce, or trade their rights during the trading period. They may also apply for excess Rights Shares, which will be allocated based on shareholder priority rules.
• CPF Investment Scheme: Shareholders who purchased their shares using CPF funds may use the same to subscribe for their entitlements and apply for excess Rights Shares.

Potential Impact on Share Price

The rights issue offers shares at a significant discount, which could create downward pressure on GSS Energy’s share price in the short term. However, the initiative aims to strengthen the company’s capital base, repay debt, and fuel business growth, which could enhance its long-term value and appeal to investors.

Important Disclosures

• Conditions: The rights issue is subject to regulatory approvals, including the listing and quotation notice (LQN) from the Singapore Exchange (SGX-ST).
• No Recent Fundraising: GSS Energy has confirmed that it has not undertaken any equity fundraising exercises in the past 12 months.
• Directors’ Statement: The directors have stated that the company’s current working capital is sufficient to meet its needs but believe the rights issue will further strengthen its financial position.

Conclusion

GSS Energy’s proposed rights issue is a strategic move aimed at improving its financial stability and expanding its business operations. While the discounted share price may initially impact its market value, the long-term benefits of debt repayment and enhanced working capital could potentially bolster shareholder confidence and the company’s market position.

Shareholders are advised to exercise caution when trading shares and to consider seeking professional financial advice if they are uncertain about the rights issue’s implications.

Disclaimer

This article is for informational purposes only and does not constitute financial advice or an offer to sell, purchase, or subscribe for shares. Readers should consult their financial advisor before making any investment decisions. The information provided is based on publicly available data and is subject to change.