Mrkt BUZZ Zazz Energy: Convertible loan ensures restart

Today, June 20, 2023, Zazz Energy unveiled its decision to raise SEK 7 million through a convertible loan. The company will also issue 70 million free warrants to selected investors as part of the offering. If fully redeemed, Zazz energy will receive an additional SEK 7 million from the warrants before the end of 2024. The funds raised primarily aim to fulfil the requirements necessary to restart the Amfilochia plant. Furthermore, the convertible loan strengthens the financing of two other ongoing projects. The loan has a monthly interest rate of 1.75 per cent and matures from July 1, 2023, to December 31, 2023. It can be converted at a rate of SEK 0.10 per share on a maximum of two occasions during the loan term.

Carlsquare Equity Research views this as a positive step towards reinvigorating the business. However, it is worth noting that the loan comes with relatively high costs and short maturity. Consequently, there is a risk of loan repayment by the end of 2023 unless lenders opt to convert it into shares. Moving forward, the successful restart of the plant and the generation of revenues and cash flow in the latter half of 2023 are crucial. The company has previously stated that the plant will resume operations no later than June 30. It is important to highlight the potential dilution effects of both the convertible loan and the warrants. While the risk surrounding the company remains high, we reiterate our earlier analysis, suggesting that risk-averse investors may still find potential for favourable returns in the share.

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