Back in March 2019 artificial intelligence or machine learning data business Appen Ltd (ASX: APX) announced the acquisition of software-as-a-service business Figure 8 for up to US$300 million and an associated capital raising.
It chose to raise $285 million from institutional investors and $15 million from retail investors at $21.50 per share.
Unsurprisingly the retail capital raising was 3.4x oversubscribed with the group yesterday revealing applications will be scaled back to the tune of 71%, or meaning shareholders will only receive on average 29% of amounts applied for.
While this is likely to be a disappointing outcome for retail shareholders the reality is that anyone who has owned Appen shares since February 2019 or longer is likely to be heavily in the black and cannot complain too much.
Given the stock sells for $23.70 this afternoon capital raising subscribers are already sitting on an instant $2.20 per share stag-type profit as an additional little bonus to some likely large capital gains on their total shareholding.
For investors though it will mean little unless Appen can deliver a return on investment on what looks a high stakes move in buying an unprofitable SaaS business for up to US$300 million.
The acquisition will test management's almost perfect track record operating a fast-growing listed company with the stock likely to remain volatile until its next trading update.
Another software-as-a-service business in WiseTech Global Ltd (ASX: WTC) has also been on an acquisitive spree recently supported by a large capital raising, with the results of its endeavours likely to emerge over the next 12 months.
