Appen's got the hat out to shareholders again -

Highlights

• A$50 million underwritten institutional placement to provide balance sheet flexibility to fund

generative AI related opportunities (Placement)

• Appen has returned to underlying EBITDA and underlying cash EBITDA profitability in Q3

FY24, having taken the necessary steps to manage its cost base in line with the revenue

opportunity

• Appen’s external customer environment continues to show signs of improvement,

particularly from generative AI related projects. Proceeds from the Placement will provide

additional liquidity to fund working capital and provide greater flexibility to pursue

generative AI related opportunities

• Upon settlement of the Placement, Appen will have a pro-forma cash balance of

approximately US$62.4 million

• Opportunity for eligible existing shareholders to participate via a non-underwritten Share

Purchase Plan (SPP) which is targeting to raise a further A$5 million at the same offer

price as the Placement (A$1.92 per share (Offer Price))

The accompanying trading update and commentary are positive, but I don't like the repeated issuance of new shares, and I doubt the market will be too (though happy to be surprised!).

Appen shares have been on a tear of late, more than trebling from their lows hit only last month. Quite extraordinary.

What I would like to know to gauge the sustainability of this trend (apart from meaningfully positive fundamental developments which may come out with earnings next week), is who has been buying?

It will be good if institutions were behind the strong buying seen lately, though there have been no significant change in sub. holding notices filed. Is it just retail-driven meme-stock-like FOMO?

The company responded to a recent ASX price query too saying they know nothing.

APX has responded to the ASX aware query, revealing that it "recently" received a highly indicative merger proposal from US-listed Innodata, in a stock for stock deal that was at a 100% premium to the prevailing share price.

Hopefully that is very recent, and not from the 52w lows. That may determine whether the next move is up or down when it comes out of the halt.

https://hotcopper.com.au/documentembed?id=uOMxKKzFkiWRTLKhOROKAxjvSDYL5g%2B9yhjzv%2FZp57FiGug%3D

A pause in trading after a 30% ride in the first half of the session.

Not a leaky ship at all. Hope they announce that big telco contract they were touting/expecting.

Barely 6 months after raising at more than 3x the current CR price, the company is out again with its hat (or begging bowl) extended eagerly to the market.

It's $30m now, but still highly dilutionary given the steep discount to the current market price (~35%). The reason for the raise is just as bad - to fund working capital needs.

And oh, the CTO has moved on barely after few months into his job.

Why would any market participant bother to participate is beyond me. This company just knows how to light shareholder wealth on fire.

Summary of the announcement -

 Appen provides FY23 trading update as at 31 October 2023

• Appen remains committed to return to profitability with additional $14

million of cost reduction, bringing total run-rate cost reduction initiatives

that have been or will be implemented over 2023 to $60 million

• Equity Raising is comprised of a ~A$23.6 million 1 for 3.65 pro rata

accelerated non-renounceable entitlement offer and a ~A$6.4 million

institutional placement

• Proceeds will be used to provide balance sheet flexibility and general

working capital to support Appen’s return to profitability, and transaction

costs

....ah, yes. Because that's what long-suffering shareholders were looking forward to - more dilution near multi-year lows!

It's early days to judge new management, but this and the "strategy refresh" have the distinct clutching-at-straws feel.