Newcastle investment company Tanfield Group has declined to take part in a funding round for troubled US-based Smith Electric Vehicles, a business in which it holds a stake.
Smith is seeking to raise up to $10m over the next 30 days otherwise it will be "in a difficult financial position" and will likely be forced to seek protection under US bankruptcy laws or close down its operations.
AIM-listed Tanfield, which owns a 5.8 per cent stake in Smith, said it wouldn't be partaking in the round. It added: "A further announcement will be made when the outcome of the fundraising is known but if successful, it would have a significant dilutive effect upon the value of the current Smith holding."
As reported in its interim results for the period to 30 June 2015, the current book value of Smith on Tanfield's balance sheet was £4.8m against total assets of £41.4m.
Following the disclosure on Smith's financial position, Tanfield's share price dropped by more than 12 per cent yesterday morning (28 September 2015) to 15.3p. They closed the day at 16p.