BrainChip Holdings Ltd (ASX: BRN) shares are currently on hold, locked at 20 cents each, following the company’s request for a trading halt this morning. The halt comes as the rest of the Australian share market shows positive movement, with the S&P/ASX 200 Index (ASX: XJO) up 0.6% on Tuesday.
Need for Fresh Capital
The trading halt for BrainChip, an ASX tech stock, is linked to the company’s efforts to secure additional funding. Known for its neural networking chip technology, BrainChip has informed the ASX of its intention to raise capital. Details regarding the specifics of the capital raise will be revealed in a future announcement. The halt is expected to remain in place until at least Thursday morning, or until further information is disclosed.
Current Financial Situation
As of March 31, BrainChip had $13 million in cash reserves. The company’s expenditures for the last quarter, which amounted to $4.9 million, provided a cash runway of just over two and a half months. Additionally, BrainChip had previously arranged a funding agreement with LDA Capital, which includes a capital call arrangement of approximately A$50 million. The company had committed to drawing at least A$12 million from this deal by December 31, 2024. Despite these arrangements, concerns about financial sustainability appear to have prompted the current capital-raising effort.
Impact on Shareholders
The decision to raise additional capital at this time may lead to shareholder dilution. Given the current share price of 20 cents, compared to a 52-week high of 54 cents, the company will need to issue a larger number of shares to raise the same amount of funds as would have been required earlier in the year. This dilution effect will impact existing shareholders unless they participate in the new funding round.
Further details on the extent of the dilution and the specifics of the capital raise are awaited in the upcoming announcement from BrainChip Holdings.