Left at the altar: Appen shares slide 20pc after takeover implodes

Artificial intelligence services provider Appen’s chairman Richard Freudenstein has defended the company’s board and executive team from investor criticism after the sudden collapse of a billion dollar takeover offer sent its shares into freefall.

Appen this week confirmed it had been approached by Canadian tech giant Telus with an indicative takeover offer of $9.50 a share, while also releasing a weak trading update. But only hours later the deal had imploded, and Telus told the Sydney Morning Herald and The Age on Friday that it lost interest after having a closer look at the ASX-listed group.

Richard Freudenstein said Appen has yet to receive an explanation from Telus about the abrupt withdrawal of its offer. Credit: Pat Scala

“We maintain a very healthy and robust M&A pipeline, and at any given point in time, our company is in various stages of due diligence with potential targets. We are a selective acquirer, and as such we engage in a robust evaluation of all target companies,” a Telus spokesperson said.

“In this particular case, we did look at Appen, and after an initial evaluation, made the decision to walk away from our non-binding offer.”

Appen shares fell by more than 20 per cent to close at $6.54.

Appen’s trading update flagged revenue for the year to date is below last year’s and earnings will take a hit.

The company indicated on Friday morning that it still has not been provided with an explanation for the abrupt withdrawal of Telus’ offer. Telus had been given a confidentiality agreement to sign days earlier, which would allow Appen to hand over market-sensitive information.

Appen makes most of its money from crowdsourcing a global workforce of a million people that do the low-level grunt work for tech giants such as Facebook, Google and Amazon. The workers teach computers to recognise basic images and speech, laying the groundwork for the development of AI solutions.Credit: Bloomberg

“Yesterday afternoon Telus sent us a letter that indicated they were revoking their offer, without providing any rationale or explanation,” Appen’s chairman Richard Freudenstein, said at its AGM in Sydney Friday morning.

“We sought to reach out to Telus through their advisers but have not been able to establish contact.”

Freudenstein acknowledged that it has been a tough time for investors with shares down by 80 per cent in less than two years as the tech market fallout adds to specific market worries about Appen.

Appen stock soared as much as 35 per cent after the announcement of the approach on Thursday. Shares had been trading above $10 in February and higher than $40 in August 2020.

Appen makes most of its money from crowdsourcing a global workforce of a million people who do the low-level grunt work for tech giants such as Facebook, Google and Amazon. The workers teach computers to recognise basic images and speech, laying the groundwork for the development of AI solutions.

Its share price crashed in 2020 after a series of downgrades raised concerns that its five major customers, which account for 80 per cent of its revenue, may be growing less dependent on its services.

“I understand that shareholders are very unhappy with where the share price is today. The board and management acknowledge that some areas of our business have not delivered to their full potential. We also acknowledge the concern of some investors about not providing near-term guidance as we are focused on our long-term strategy,” Freudenstein said in his speech.

In response to shareholder calls for the board and CEO to resign, Freudenstein pointed to the already significant refresh of the board and executives. “We believe we have a good strategy in place, and we believe we have a good team to deliver it.”

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.