One of the worst performers on the Australian share market on Wednesday was the ResApp Health Ltd (ASX: RAP).
The digital healthcare company's shares returned from a trading halt and fell a sizeable 15% to 23 cents.
Why was ResApp in a trading halt?
ResApp requested a trading halt on Monday while it prepared the release of an announcement regarding a capital raising.
This came as a bit of a surprise to many shareholders because in a presentation released just days earlier management advised that it was well-funded to execute its ongoing clinical strategy.
Today the details of the capital raising were revealed. ResApp announced that it has received firm commitments from institutional and sophisticated investors to raise $7.5 million at a price of 22 cents per share. This is an 18.5% discount to the last close price.
According to the release, the placement was managed and coordinated by Morgans and was oversubscribed with strong support from new and existing institutional and sophisticated investors.
Incidentally, two weeks ago Morgans lifted its price target on ResApp's shares from 28 cents to 32 cents following the release of its full year results. The broker has an add (buy) rating on its shares.
What are the funds for?
According to management, proceeds from the placement will be used to strengthen the company's balance sheet and enable it to effectively pursue multiple exciting projects simultaneously.
These include investing in sales and marketing to commercialise ResAppDx in Europe, Australia, and Asia following promising results from its double-blind, prospective Australian study.
In addition to this, the company plans to immediately deploy resources to expand its clinical programs by conducting a US-based, double-blind, prospective adult clinical study during the upcoming US winter. And finally, it will investigate an array of new applications for its core technology
Should you buy the dip?
I've been very impressed with the progress ResApp has made this year and think it is well worth keeping a close eye on. However, until its technology is proven and generating meaningful revenues I'll be keeping it on my watchlist.
In the meantime, I'll be looking at healthcare technology shares such as Nanosonics Ltd (ASX: NAN) and Volpara Health Technologies Ltd (ASX: VHT).
