Why are Appen shares sinking today?

Let's see what is going on with this high-flying tech stock today.

| More on:
A man slumps crankily over his morning coffee as it pours with rain outside.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Appen Ltd (ASX: APX) shares have returned from their trading halt and are sinking into the red.

At the time of writing, the artificial intelligence (AI) data services company's shares are down 8% to $2.00.

Why are Appen shares falling?

On Friday, Appen decided to take advantage of its strong share price performance this year to raise capital.

The company is aiming to raise a total of $55 million from investors via an institutional placement and share purchase plan.

Management notes that proceeds will provide additional liquidity to fund working capital and provide greater flexibility to pursue generative AI related opportunities. It notes that Appen's external customer environment continues to show signs of improvement, particularly from generative AI related projects.

According to an announcement this morning, Appen has completed the institutional component of its capital raising. It has raised $50 million through a fully underwritten institutional placement at $1.92 per new share. This represents an 11.5% discount to where Appen shares last traded.

The release notes that the placement was strongly supported by both Appen's existing shareholders and new investors. Appen's CEO and Managing Director, Ryan Kolln, said:

The strong support for this Placement is reflective of our return to profitability on an underlying EBITDA and underlying cash EBITDA basis. It also highlights investor confidence in our growth potential as our external environment displays continuous signs of improvement, particularly from generative AI related opportunities.

Appen will now push ahead with its non-underwritten share purchase plan. It is aiming to raise $5 million at the same price as the institutional placement.

Q3 update

While it was in its trading halt, Appen also provided the market with an update on its performance during the third quarter of FY 2024.

Management advised that for the three months ended 30 September, it achieved revenue of $54.1 million. This represents a 12.9% decline over the prior corresponding period. Though, if you exclude the loss of Google as a customer, Appen's revenue would have increased 34.6% year on year.

Another positive that is likely to have gone down well with the market is Appen reporting an improvement in its gross margin. It has lifted to 41.2% from 33.6%, which underpinned a breakeven EBITDA result. This compares favourably to an $8.6 million loss in the prior corresponding period. Management notes that this improvement was driven by the successful completion of its cost-out initiatives.

Commenting on its performance during the quarter, CEO Ryan Kolln said:

Profitability is a key focus for Appen and we are very pleased to have returned to underlying EBITDA and underlying cash EBITDA profitability in Q3 FY24. Our external environment continues to display signs of improvement and we are excited by the potential opportunities that this presents.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Technology Shares

group of traders cheering at stock market
Technology Shares

Codan shares near an all time high. Can they go higher?

Is there more room for growth for this ASX 200 company? 

Read more »

Kid putting a coin in a piggy bank.
Technology Shares

Why I think this ASX small-cap stock is a bargain at $4.41

This tech business has a lot going for it.

Read more »

The last piece of the jigsaw being fitted, indicating good news for a share price on merger or acquisition
Mergers & Acquisitions

WiseTech share price storms higher on $3.25b blockbuster acquisition

What is the company spending billions on? Let's find out.

Read more »

A businessman stacks building blocks.
Technology Shares

6% gain! What's up with Block shares today?

Block shares are up more than 34% since 2 May.

Read more »

Happy work colleagues give each other a fist pump.
Technology Shares

Guess which ASX 200 technology stock has outperformed Nvidia over the past 5 years?

This company has been nothing short of impressive.

Read more »

Buy, hold, and sell ratings written on signs on a wooden pole.
Technology Shares

After surging 13% yesterday, are TechnologyOne shares a buy, hold or sell according to Macquarie?

Valuations matter when investing, and Macquarie feels no different.

Read more »

Two smiling work colleagues discuss an investment or business plan at their office.
Technology Shares

Why Goldman Sachs rates this ASX tech share as a top buy

Let's see why the broker rates this stock highly right now.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
Technology Shares

WiseTech shares have surged 34% since April. Is it too late to buy?

Can WiseTech shares keep charging higher? Here’s what this investing expert expects.

Read more »