More than 28 million shares have gone unsold in a rights issue by biodegradable plastics maker Secos Group.

Secos (ASX:SES) is becoming a maker of biodegradable resin — the stuff bio-plastic bags are made from.

Under a 2015 merger Secos combined its traditional plastic film business with a bioplastics business, but when Stockhead last checked in the transition was taking time.

On October 23, the company launched a fund-raising round to secure about $4 million to fund the expansion of its new manufacturing facilities in Malaysia.

But it revealed to investors today that only 13.9m shares had been applied for under the rights issue and shortfall offer, representing $860,665 before costs.

That was out of a maximum 42.2m shares, which would have raised $2.6 million.

Rights issues offer shareholders the chance to buy new shares in addition to the ones they already hold.

The company says it may place 28.4 million rights issue shortfall shares on the market within three months of the closure of the rights issue, which was Tuesday November 13.

Shareholders who did pick up new shares will receive them on November 20 and can trade them from November 21.

The company’s shares were flat at 6.3c this morning.

Secos Group shares (ASX:SES) this year.

Secos chairman Richard Tegoni said he welcomed the support of shareholders new and old.

“The funds raised will enable further consolidation of SECOS’ traditional plastic film operations. This one-off exercise will boost utilisation of SECOS’ capacity in its Malaysian operations and take material cost savings to the Company’s bottom line of the order of $1 million per annum,” he said.

“These changes will tighten the Company’s primary strategic focus on its rapidly growing, higher-margin bioplastic resin business. The Company’s outlook for this segment is strongly positive: we expect to increase bioplastic resin sales sevenfold, from the current annual revenue run-rate of $1 million to more than $7 million by June 2019 in this segment.

“This focus supports Secos’ ambition of becoming a world leader in bioplastics, a market with attractive demand dynamics driven by consumers increasingly requesting environmentally sustainable products, legislative change with several countries having banned single-use plastics, and rising pressure on Australian landfill sites from China’s ban on plastic waste.

“These new funds will empower the Company to aggressively boost revenue in its target markets, not just for FY19 but for longer-term growth in FY20 and FY21.”