Why has the BrainChip share price crashed 25% in a month?

Brainchip sank to a 52-week low on Friday as bearish sentiment grows…

Key points
  • Brainchip shares have sunk to a 52-week low on Friday
  • Investors have been selling the meme stock since the release of its results
  • The company generated less revenue in the second half than some cafes

The Brainchip Holdings Ltd (ASX: BRN) share price achieved a milestone today. Albeit an unwanted one.

In morning trade, the semiconductor company's shares dropped 3% to hit a 52-week low of 50 cents.

This means the Brainchip share price is now down 25% since this time last month and 60% over the last 12 months. The latter can be seen on the chart below.

A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash

Image source: Getty Images

What's going on with the Brainchip share price?

Investors have been hitting the sell button recently in response to the company's bitterly disappointing full-year results release.

Interestingly, the Brainchip share price actually rose initially after the results were released. Investors appear to have been impressed by the company's reported 220% increase in revenue to US$5.08 million for the year.

However, it didn't take long for the market to wake up and remember that Brainchip had already recorded 95% or US$4.8 million of this revenue during the first half.

That means the company posted an alarming US$250k of revenue during the final six months of the financial year. That's less than what some cafes generate and is despite its billion-dollar market capitalisation and management claiming that it was "seeing the greatest amount of sales activity and engagement in the Company's history."

In light of this lack of revenue, Brainchip recorded a loss after tax of US$22.1 million, leaving it with a cash and equivalents balance of US$23.2 million.

Investors may now be concerned that the company will have to raise capital again through its arrangement with LDA Capital, further diluting shareholders, and putting downward pressure on the Brainchip share price.

This will no doubt be music to the ears of short sellers, who have been loading up on its shares this year.

According to data from ASIC, 6.7% of the company's shares are held short at present. Short sellers appear to believe that Brainchip is all hype and no substance.

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 Scott Phillips.

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