At time of writing, shares of PainChek Ltd [ASX:PCK] are in a trading halt pending a further announcement.
The Painchek share price has had a remarkable rise since the end of April:
Today, we look at some possible outcomes from the Painchek trading halt and discuss the factors that lead to the stock’s breakthrough.
PainChek has a couple of options on the table
PainChek’s rise was aided significantly by an announcement which detailed an agreement with a UK-based software company for the distribution of its artificial intelligence (AI) enhanced product.
Perhaps one stumbling block for the company though, is that they have limited cash on hand to drive growth.
As per their quarterly report, they had $1.992 million in cash and cash equivalents.
Crucially, this doesn’t include the $5 million due to be received from the Federal Government as per an announcement at the end of the April.
As such, it is conceivable that the upcoming announcement will include details about an upcoming capital raise.
Whether this takes the form of a Share Purchase Plan (SPP) or an institutional placement is hard to say.
If it is an SPP, the terms of the offering of additional shares sometimes include a discount to the volume weighted average price (VWAP).
A few things that could result from Painchek trading halt
Although this is pure speculation, the upcoming announcement could include information regarding a few things:
- Funds to be used for further expansion in UK/EU/US market
- A smaller capital raise to hold the company over until Federal Government funds are received
- A partnership with a larger company to increase distribution
Following a capital raise, it is not uncommon to see the share price fall if the additional shares are offered at a discount. But capital raises are not always bad news — they provide the opportunity for further growth if the funds are used appropriately.
To conclude, Painchek is in a critical growth phase, as you can see below:
How it navigates the next few months could be important for its long-term prospects.
Its AI product is certainly exciting, and could be part of a broader push to modernise the healthcare sector.
If the company manages to crack the lucrative US healthcare market for instance, big things could be in store.
We will provide an update when PainChek shares come out of the trading halt.
For Money Morning