NEW YORK (TheStreet) -- MagneGas Corporation (MNGA) is plunging on the news it has entered into a definitive agreement with an institutional investor for the financing of $5 million in gross proceeds.
By market open, shares had tanked 18.1% to $1.76.
Under the agreement, the hydrogen fuel producer will issue 2 million shares of its common stock and Series C convertible stock exchangeable for around 1.45 million shares of common stock.
The purchase price of $1.45 a share will generate gross proceeds of $5 million, which the company intends to use for general corporate purposes, such as working capital and potential acquisitions.
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The Tarpon Spring, Florida-based business will allow unregistered warrants to purchase up to 1.72 million shares at an initial exercise price of $2.15.
The offering is expected to close around March 28, pursuant to customary closing conditions.
Northland Capital Markets is serving as sole placement agent for the offering.
Shares of the alternative energy producer have been soaring over March after the company announced it had been awarded contracts in four demolition projects. As part of the contracts, MagneGas will provide its torch-cutting fuel in the four projects, which include the demolition of a Washington, D.C. bridge, automobile manufacturing facilities in Ohio and Michigan and a power plant in New York.
Year to date, shares are up 388.6%.