Accys Technologies fund raising sees its shares take a nosedive

On the day Deputy Prime Minister Nick Clegg was setting out plans for a "new model of economic growth", shares in his elder brother's firm plunged by more than 40% as it tapped investors for 30 million (£25.3 million) to help keep the business afloat.

Accsys Technologies, run by Paul Clegg, is behind a wood-treating process which gives soft woods the properties of more durable timber.

But the firm is burning cash at the rate of 1 million a month and is in dire need of new funding to meet short-term running costs as well as expand its Arnhem production plant in The Netherlands.

Accsys is selling 200 million new shares at a mammoth 58.9% discount to yesterday's price - a huge dilution for existing investors which sent the company's shares tumbling 43% to 21 cents today.

Clegg said that the cash-call had brought new institutional investors on board, but added: "If we did not raise this funding we would be in very serious trouble."

It is the second fundraising for Accsys in a year after Clegg, a former investment banker who joined the business in August 2009, raised 16.9 million in February 2010.

The firm wants to generate long-term profits by licensing its technology to other producers, but needs to expand the plant to meet strong demand for its Accoya wood, used in housing.