Deja

May 17, 2023

Another day, another huge decline for this struggling tech share. James Mickleboro has been a Motley Fool contributor since late 2015. After studying economics at university back home in the United Kingdom, James came to live in Australia and managed to land a job at an Australian fund manager. This was the start of a love affair with Australian equities and he hasn't looked back since. James is part of the CFA Institute's Chartered Financial Analyst program and hopes it teaches him how to become an astute investor which allows him to help others with their own investing. Outside of reading and researching he spends many a late night watching the English Premier League and Seinfeld reruns. Latest posts by James Mickleboro ( see all ) 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 The Appen Ltd ( ASX: APX ) share price has returned from its trading halt and is crashing deep into the red again. At the time of writing, the struggling artificial intelligence (AI) data service provider’s shares are down 17% to $1.91. This means the Appen share price is now down 71% since this time last year. Why is the Appen share price crashing again? Investors have been selling down the Appen share price today after the company announced the completion of the institutional component of its fully underwritten ~$60 million equity raising. This comprises a $38 million 1 for 6 pro rata accelerated non-renounceable entitlement offer and a ~$21 million institutional placement. According to the release, the company raised $21.2 million through the institutional placement and $8.8 million via the institutional entitlement offer. These funds were raised at $1.85 per new share, which represents a sizeable 19.6% discount to its last close price. It is also a 42% discount to where the Appen share price was trading just a little over a week ago, prior to the release of its disastrous trading update. Appen’s CEO, Armughan Ahmad, was pleased with the news. He said: Appen is delighted with the successful outcome of the Institutional Component of the Equity Raising and the support received from both existing and new institutional shareholders. We look forward to executing on the vision we have communicated to the market and delivering results for our shareholders. The company will now seek to raise the balance via a retail entitlement offer at the same price. Why is Appen raising funds? The release explains that the proceeds of the equity raising 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. Management appears to believe the latter will be supported by the emergence of generative AI, which is the type of AI used by ChatGPT. It notes that the generative AI market is estimated to grow from $8 billion in 2021 to more than $110 billion by 2030. And as high performing generative AI models rely heavily on human feedback, Appen believes it is well positioned to participate and gain share in the generative AI services market thanks to the launch of a new set of Large Language Model (LLM) fine tuning and assurance products. Though, it is worth remembering that Appen is not alone in this market and there’s no guarantee that its products will be in demand by end users. And judging by the recent performance of the Appen share price, the market has yet to be convinced. 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 positions in and has recommended Appen. 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