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Why the Appen share price has crashed 10% lower today

The Appen Ltd (ASX: APX) share price has returned from its trading halt with a bang on Tuesday.

In early trade the shares of the global leader in the development of high-quality, human annotated datasets for machine learning and artificial intelligence are down 10% to $21.90.

Why were Appen shares in a trading halt?

Appen requested a trading halt on Monday whilst it launched a fully underwritten placement of $285 million at an offer price of $21.50 per share.

The company advised that it would use these funds to acquire San Francisco-based Figure Eight Technologies. Figure Eight is a best in class machine learning software platform which uses highly automated annotation tools to transform unstructured text, image, audio and video data into customised high-quality artificial intelligence training data.

This morning the company announced that it has successfully completed the placement, with CEO Mark Pivan advising that the placement was “well supported by our existing institutional shareholders, and also saw Appen welcome a number of new institutional investors onto the register.”

Settlement of the placement is expected to occur on March 15, with the allotment of shares expected to occur on March 18.

The company will now push ahead with a share purchase plan to raise a maximum of $15 million at the lower of the placement price and the price that is a 2% discount to the volume weighted average price of its shares over the five trading days up to, and including, the closing date of the plan.

As the funds are being raised at a discount, it isn’t overly surprising to see its shares come under pressure today. The reason for this is that some existing shareholders that secured shares at the placement price of $21.50 could be selling off some of their current shares to make a quick profit.

Should you buy shares?

I think acquisition makes a lot of sense and should help Appen further cement its position as the leader in the fast-growing industry.

In addition to this, the company has a track record of successfully integrating its acquisitions. If it can do the same with Figure Eight, then I believe the company will be positioned to continue its strong earnings growth for some time to come.

In light of this, I think Appen would be a great buy and hold option along with fellow tech stars Altium Limited (ASX: ALU) and Xero Limited (ASX: XRO). I would suggest investors consider picking up shares on today’s share price weakness.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium, Appen Ltd, and Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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