Sibanye’s shares dive 22% amid R9.2 billion bond sale

Sibanye Stillwater plunged the most since March 2020 after the South African miner of platinum-group metals said it would raise R9.2 billion ($500 million) by selling bonds convertible into its shares, a move that will dilute existing investors’ holdings. 

The stock sank as much as 25% in Johannesburg, wiping out about R15.2 billion ($824 million) of its market value.

The use of the bond proceeds includes funding the 9 November purchase of US metals recycler Reldan Group of Companies for $155.4 million in cash, Sibanye said in a statement Tuesday.

Sibanye is deepening its push into producing platinum-group metals used to curb pollution emitted by internal combustion engines while contending with weakening commodity prices.

Analysts at Citigroup said the bond deal heightens the “acquisition risk overhang.”

The risk is higher “especially in the current lower commodity price environment,” Citi analysts led by Ephrem Ravi wrote in a note. Sibanye trades at a discount to its peers, reflecting these concerns, according to the analysts.

Still, investors appeared attracted to the new debt. Indicated demand for the bond exceeded the deal size, according to terms sheets seen by Bloomberg News. Orders below the midpoint of the marketing range risk missing the transaction, according to the terms.

The conversion price is expected to be within a range of 30%-35% above the volume-weighted average price of Sibanye’s shares between the opening and closing of trading in Johannesburg Tuesday, the company said.

The bonds are expected to pay an annual coupon of 4%-4.5%.

Sibanye shares were 22% lower by 12:40 p.m. local time.