The Appen Ltd (ASX: APX) share price closed 4.1% higher at $25.23 today despite the machine learning business releasing no specific news to the market.
After raising around $300 million in March 2019 via the issue of new shares to institutional and retail investors the company has around 120.9 million shares on issue to give it a market value of $3.05 billion based on today's share price.
Appen raised the money to complete the acquisition of US-based machine learning software platform Figure Eight for around A$375 million when you factor in an earn out consideration between $86 million to $114 million expected to be payable in March 2020.
This is a dizzy price to pay for a business that is not yet profitable, although to be fair Appen's management they have a second-to-none track record of completing giant acquisitions to the long-term benefit of the business. Indeed it was the November 2017 $105 million acquisition of Leapforce that helped catapult Appen into the big time despite some sceptics over its strategy.
Appen also ticks the boxes as a founder-led company in the tech sector of machine learning that is seeing explosive growth.
It's also still a lot smaller than the likes of Xero Limited (ASX: XRO) to mean it has plenty of room to grow yet.
The obvious downside is its valuation on conventional valuation metrics and it looks an investment suitable for people with a high risk tolerance.
