Brainchip share price sinks amid weak quarterly update

Brainchip shares are sinking on Wednesday…

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Key points

  • Brainchip shares are sinking on Wednesday
  • Weakness in the tech sector and a poor quarterly update have hit its shares hard
  • Brainchip reported cash receipts of just US$0.2 million during the quarter

In morning trade, the Brainchip Holdings Ltd (ASX: BRN) share price has continued its long slide.

At the time of writing, the artificial intelligence technology company’s shares are down 6.5% to 85.5 cents.

This means the Brainchip share price is now down 63% from its January high of $2.34.

Why is the Brainchip share price sinking today?

Investors have been selling down the Brainchip share price amid weakness in the tech sector and in response to the release of a disappointing quarterly update.

In respect to the latter, after the market close on Tuesday, Brainchip released its quarterly update for the period ending 31 March.

According to the release, for the three months, Brainchip recorded cash receipts of just US$205,000.

This was despite the company announcing in January that it has begun taking orders for the first commercially available Mini PCIe board leveraging its Akida neural networking processor, which rounded out its suite of AKD1000 offerings. Furthermore, the company revealed that it spent US$834,000 on advertising and marketing during the period.

Given that the Brainchip share price prior to today implied a market capitalisation of approximately $1.6 billion, investors appear to believe that this level of sales doesn’t justify such a lofty valuation.

Were there any positives?

One positive from the release was that Brainchip’s cash balance has been boosted thanks to its funding arrangement with LDA Capital. That arrangement saw Brainchip issue US$16.1 million worth of shares to LDA Capital upon the submission of capital call notices. However, it is unclear if LDA Capital is holding onto these shares or simply offloading them upon receipt for a quick profit.

Nevertheless, at the end of the period, Brainchip had cash and cash equivalents of US$31.2 million, up from US$19.4 million at the end of December.

Time will tell whether this will be sufficient to see Brainchip through to profitability, if it ever gets there.

Motley Fool contributor James Mickleboro has no position 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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