The Appen Ltd (ASX: APX) share price won't be going anywhere on Tuesday.
That's because the embattled artificial intelligence (AI) data service provider requested a trading halt this morning.
The company has requested that the halt last until the commencement of trade on Wednesday.
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Why is the Appen share price paused?
The Appen share price is out of action today after the company announced plans to raise capital.
The request briefly explains:
The trading halt is requested as Appen expects to make an announcement to ASX in connection with a pro rata accelerated non-renounceable entitlement offer and institutional placement (the Offer). (b) Appen requests that the trading halt remain in place until the earlier of: (i) Appen making an announcement to the market regarding the outcome of the institutional component of the Offer (ii) the commencement of trading on Wednesday, 17 May 2023.
Capital raising
Interestingly, brokers were discussing the prospect of a capital raising after the company's abject trading update last week. Bell Potter, for example, commented:
We have downgraded our 2023, 2024 and 2025 revenue forecasts by 17%, 18% and 18%. We now forecast an underlying EBITDA loss of US$(23.2)m in 2023 – previously we forecast positive US$14.3m – and have downgraded our underlying EBITDA forecasts in 2024 and 2025 by 49% and 30%. We now forecast Appen utilises some of its A$20m debt facility in 2H2023 and assume there is some increase in the size of the facility when the company refinances later this year. This should avoid any need of a capital raising and we have not assumed any in our forecasts.
Perhaps this could be a sign that its lenders are not confident enough in its outlook to increase the size of its debt facility.
What is Appen raising?
Appen has revealed that it is raising ~A$60 million via a fully underwritten equity raising to support the company's strategic refresh and return to profitability.
The company is raising the funds at $1.85 per new share, which represents a 19.6% discount to where the Appen share price last traded.
Proceeds will be used to fund one-off costs associated with its previously announced cost reduction program, provide balance sheet flexibility and general working capital to support Appen's return to profitability, and transaction costs.
The equity raising comprises a ~$38 million 1 for 6 pro rata accelerated non-renounceable entitlement offer and a ~$21 million institutional placement.
