Earlier this morning shares of PainChek Ltd [ASX:PCK] were down 8.82%, trading at 15.5 cents. At time of writing the share price is back to 18 cents, up 5.88%.
The Painchek share price took a slight dip after a meteoric rise over the past month:
Today, we’ll look at why the PainChek share price initially went down and the details of its recent capital raise.
PainChek opts for placement over SPP
As we speculated in previous coverage, the content of today’s announcement included details of a capital raise.
If the extra shares that stem from a capital raise are offered at a discount, it is not uncommon to see the value of the shares fall.
When a capital raise is needed, growth companies such as PainChek sometimes turn to retail and/or sophisticated shareholders for more money to fund their expansion.
In this case, PainChek opted for a $4.15 million placement via ‘a range of current sophisticated Painchek shareholders, including two major shareholders.’
Here are the details of the placement:
- Placement priced at 14.5 cents
- Price is a 10% discount to the 10-day volume weighted average price (VWAP) of 16.11 cents
- The investors that subscribe to placement will receive one free attaching unlisted option (for every two shares taken up) exercisable at 25 cents
- This option expires at 30 June 2022
The shares will be issued in two tranches, $3.15 million on 20 June, and $1 million on 19 July of this year.
The options will give the company additional funds, should they be exercised at a later date.
What PainChek will use the money on
Importantly, the company outlined what the funds will be used on:
- Market expansion into ‘selected European and overseas markets’ under CE mark clearance (an EU compliance mark)
- Market development for new segments such as direct to consumer and hospitals
- FDA De Novo regulatory clearance
- Completion of clinical study for Children’s App
PainChek CEO Philip Daffas commented on the placement:
‘We are now well positioned to extend into multiple international markets and deliver on the Children’s App that has an even larger market opportunity. These new funds give us the runway to do just that.’
So despite today’s fluctuations, the company has now outlined its ambitious plans for growth.
It will just be a matter of execution now.
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For Money Morning