Artificial intelligence specialist Appen has tapped investment bank Barrenjoey for an equity raising worth about $60m after facing pressure from its lenders and launching plans to cut costs.
The company was placed in a trading halt on Tuesday ahead of the market open.
Appen is raising the funds at $1.85 a share, with $21m through a placement and $38m through a rights issue.
The raise is a 19.6 per cent discount to Appen’s last closing price of $2.30 on May 15.
Its shares last traded at $2.30 with its market value at $285.9m after the company, which counts Facebook owner Meta as its largest customer, saw its shares sail over $40 during the global pandemic.
It comes after shares in the artificial intelligence specialist plunged 28 per cent on May 10 when it surprised investors by revealing an expected sharp decline in revenue this year.
The company blamed external operating and macroeconomic conditions.
It said it expected underlying earnings before interest, taxation, depreciation and amortisation for the first half of the 2023 financial year to be materially lower than the same time a year earlier.
On Tuesday, Appen said that the raise was to support its strategic refresh and return to profitability.
The proceeds will be used to fund one-off costs associated with Appen’s previously announced cost reduction program, provide balance sheet flexibility and general working capital to support Appen’s return to profitability and transaction costs.
The company had earlier announced a cost reduction program and the funding will be to pay for the one-off costs associated with implementing the cost reduction program.
Estimated costs are expected to include between $4-5m relating to severance and leave provision payouts of $1.5m to $2m.
It comes as Appen’s bank Westpac has granted a waiver of financial covenants in relation to the June testing date for its credit facility, conditional on the completion of the equity raising.
The facility is currently undrawn.
Metrics Credit poised for $125m Keyview refinancing deal
Metrics Credit has emerged as a key lender to Elanor Investors that is poised to strike a $125m refinancing deal with Keyview Financial Group.
Ellison’s Mineral Resources on watch for potential equity raising
Should the share price fall further, many in the market suspect that Mineral Resources could be a candidate to raise equity.