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Brainchip share price surges 9% on new financing facility

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The Brainchip Holdings Ltd (ASX: BRN) share price is pushing higher this morning following news that the company has entered into an Equity Draw Agreement with LDA Capital. At the time of writing, the Brainchip share price has jumped more than 9% to 18 cents.

What does Brainchip do?

Brainchip is involved in the development of software and hardware accelerated solutions for advanced artificial intelligence (AI) and machine learning applications. The company maintains a primary focus on the development of its processor unit hardware product, Akida.

Akida is both scalable and flexible to address the requirements in edge devices. An edge device is any piece of hardware that controls data flow at the boundary between two networks, such as a router or a smartphone. Akida is designed to provide ultra-low power and fast AI edge network for vision, audio, olfactory and smart transducer applications. The edge AI market is forecast to exceed US$50 billion by 2025 and is the central focus of the company.

Brainchip has revenue channels in Australia, North America, Europe, the Middle East and Asia. 

What is pushing the Brainchip share price higher?

This morning, Brainchip announced is has entered into an agreement with LDA Capital in regards to a financing facility. The agreement provides financing in the form of a Put Option for up to $29 million.

LDA Capital is an American company that provides capital to companies seeking financing in traditionally underserved markets. The company has aggregate transaction values of over $10 billion and operates in 42 countries. LDA Capital Managing Partner, Anthony Romano, said of the deal, “We believe Brainchip’s Akida Neuromorphic Processor offers a unique solution to the current limited power budget and processing capabilities of today’s edge AI technology.”

The facility strengthens Brainchip’s balance sheet and is intended to support the commercialisation of its Akida technology. The deal provides the company with up to $29 million in committed equity capital over the next 12 months. This may be extended by the parties for a further 12 months if required. The company will control the timing and maximum amount of the draw down under this facility subject only to the minimum draw down commitment of $10 million within the first 12 months.  Brainchip CEO, Lou DiNardo, stated “We are pleased to have very high-quality U.S. based institutional investment group as part of our register.”

What now for Brainchip?

The Brainchip share price has been soaring higher this morning as it reached a high of 18 cents, up 9.09% from yesterday’s close. Furthermore, the company has seen remarkable growth this year, up 500% since its lows in March. Shareholders will be buoyed by the fact that this deal provides added protection for the company as the economy continues to face COVID-19 related uncertainty.

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Motley Fool contributor Daniel Ewing has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. 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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