The BrainChip Holdings Ltd (ASX: BRN) share price is deep in negative territory in late afternoon trade. This comes after the artificial intelligence technology company announced a capital call notice to one of its major shareholders.
At the time of writing, BrainChip shares are down a sizeable 6.54% to 50 cents. In comparison, the All Ordinaires Index (ASX: XAO) is down 0.2% to 7,879 points.
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BrainChip submits capital call notice
According to its release, BrainChip submitted a capital call notice to its 8th biggest shareholder, LDA Capital Limited.
A capital call notice refers to when a company requires funds from a partner whenever the needs arise. The "short-term" loan ensures enough liquidity for the company to fund ongoing investment projects.
Capital calls are legally binding agreements between both the company and the partner. Failure to adhere to a capital call can result in penalty charges, as well as the partner being forced to sell its shares.
Under the notice, LDA Capital will subscribe for up to 8.75 million BrainChip shares. LDA currently holds a 0.68% interest or approximately 11.14 million shares in BrainChip.
The issue price for the capital call shares will be above 90% of the daily volume-weighted average price over 10-days after exercising the put option.
BrainChip stated that currently, the capital call notice amounts to available funding of $34.2 million. In addition, the company is seeking to draw down a further minimum amount of $9.2 million before 22 October 2021.
BrainChip founder and CEO, Peter van der Made commented:
The proceeds raised from the capital call will be used to strengthen the Company's balance sheet and is intended to support ongoing efforts to commercialize the company's ground-breaking Akida technology.
Proceeds will also be used to strengthen the sales & marketing team in anticipation of the launch of Akida later this year, as well as increased focus on customer engagement and investor relations activities in Australia, the US and Europe.
About the BrainChip share price
Over the last 12 months, BrainChip shares have gained 150%, with year-to-date up almost 20% higher. The company's share price reached a 52-week high of 97 cents per share in September 2020, before moving in circles.
On valuation grounds, BrainChip has a market capitalisation of $838.1 million, with 1.6 billion shares on its registry.
