European Lithium Equity Faces Significant Dilution from Dual Share Issuance

European Lithium is undertaking a substantial restructuring of its capital base, announcing two separate share issuances within a two-day period. This move has placed the potential dilution of existing shareholders' stakes squarely in the spotlight, as the company pursues both internal financing and a major acquisition.

In a significant strategic move, European Lithium has entered into a binding agreement to acquire Velta LLC. The transaction carries a value of 1.6 billion Ukrainian Hryvnia (UAH).

Notably, the company plans to use its own equity as the acquisition currency. To settle the purchase price, European Lithium will issue approximately 173 million new shares to the current owners of Velta. The completion of this deal remains subject to final due diligence and other customary closing conditions. This approach conserves the company's cash reserves but results in a considerable expansion of its total share count.

Concurrent Capital Increase from Conversions

Separately, the company has applied to the ASX for the official listing of 4,996,662 new, fully paid ordinary shares. These securities were issued following the recent exercise and conversion of existing options and other convertible instruments.

Should investors sell immediately? Or is it worth buying European Lithium?

This smaller issuance leads to a modest broadening of the company's capital foundation. While increasing the number of shares in circulation, it can also enhance the stock's liquidity and tradability in the market. The action underscores management's ongoing focus on capital strategy to fund its lithium sector projects.

Shareholder Implications and Market Impact

The combined effect of these two corporate actions presents a clear picture for current investors:

• Acquisition-Linked Issuance: Planned creation of roughly 173 million new shares to finance the Velta purchase.
• Conversion-Linked Issuance: Listing of 4,996,662 new shares stemming from exercised options.

The dilution from the conversion-related shares is minimal. However, the massive share issuance required for the Velta acquisition will substantially dilute existing ownership percentages. The market will need to absorb this significant new volume of equity, originating from both a strategic expansion and the settlement of previous financial obligations.

The critical factor for shareholders will be whether the operational benefits and future earnings potential generated from the Velta acquisition can sufficiently justify the markedly enlarged share base and create long-term value.