What sent the Advanced Human Imaging (ASX:AHI) share price down 18% today?

The software company has just completed its US IPO.

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Graph showing a fall in share price.

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Shares in Advanced Human Imaging Ltd (ASX: AHI) fell directly from the open and have ended the day 18% lower at 98 cents apiece.

Investors sold Advanced Human Imaging following the completion of its US initial public offering (IPO), where it raised capital from the public to fund its expansion plans.

Here are the details.

What did Advanced Human Imaging announce?

Advanced Human Imaging has “patented a proprietary dimensioning technology that enables its users to check, track, and assess their dimensions using only a smartphone both privately and accurately”.

It has recently grown operations, securing contracts in the US earlier this year, amongst other progress. However, don’t forget that companies must put up capital to finance each move up the growth chain.

As such, companies are often faced with a capital budgeting decision in their expansion plans. It is a 3-pronged decision that weighs up using cash from the balance sheet, issuing company bonds/debt, or raising more capital from investors.

Often, public companies will issue new shares on international exchanges to raise more capital from investors. With its success to date, Advanced Human Imaging looked to the US capital markets to do just that.

Today the company announced the closing of its US IPO, where it sold 1,000,000 “units” at a price of US$10.50 per “unit” to fund its growth engine.

Each unit consists of two American Depositary Shares (ADS), plus a single warrant to purchase one ADS. Each ADS represents 7 ordinary shares in Advanced Human Imaging.

The company’s warrants are exercisable immediately, expire three years from the date of issuance and have an exercise price of US$5.52 per ADS.

The ADSs and warrants were issued separately and represented a price of $5.24 per ADS and $0.02 per warrant.

For reference, a warrant is a type of derivative that gives investors the right – but not the obligation – to purchase a company’s shares, at a specific price, on a specific date.

Equity warrants are very similar to option contracts, but they differ in a few ways. For example, when a warrant is exercised, one receives shares from the company itself – not from another investor, unlike with a stock option.

Each of Advanced Human Imaging’s ADSs began trading on the Nasdaq from 19 November under the symbol “AHI”.

Advanced Human Imaging plans to use the net proceeds primarily for research and product development and business development. The leftover funds will be used for general corporate purposes.

What else was announced?

Further to the IPO announcement, the company followed up with a separate announcement on agreements it has with Asia Cornerstone Asset Management (ACAM) and iConcept Global Growth Fund (iCGGF).

The release notes that convertible note subscription agreements with ACAM and iCGGF have been settled by mutual agreement.

The Company has agreed to issue 2,271,834 fully paid ordinary shares in ADSs to ACAM and 738,576 ADS’s to iCGGF as final settlement of all claims under or in connection with the agreements.

Advanced Human Imaging share price snapshot

The Advanced Human Imaging share price has fallen almost 18% into the red from January 1 this year. Yet, despite this, it has climbed around 12% in the past 12 months.

Zooming in and we see that Advanced Human Imaging shares are down 14% in the past month and have slipped over 16% in the past 12 months.

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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