4DMedical Ltd (ASX: 4DX) shares have returned from their trading halt and tumbled into the red.
In morning trade, the ASX tech stock was down as much as 9% to $3.90.
The respiratory imaging technology company's shares have recovered a touch since then but remain down 3.5% at the time of writing.
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Why is this ASX tech stock sinking?
The catalyst for today's weakness has been the company's decision to take advantage of recent share price strength to raise funds from institutional investors.
According to the release, 4DMedical has received total firm commitments from wholesale, professional, and sophisticated investors for a $150 million single-tranche institutional placement.
These funds will be raised at an issue price of $3.80 per new share, which represents an 11.4% discount to its last close price.
Management notes that the capital raise follows rapid commercial traction, with its CT:VQ product deployed at four leading U.S. academic medical centres within four months of FDA clearance. This includes Stanford, Cleveland Clinic, University of Miami, and UC San Diego Health.
Why is it raising funds?
The ASX tech stock advised that there are a number of reasons why it is seeking a cash injection.
Proceeds from the capital raise are intended to be used for sales, marketing, and business development to drive adoption across U.S. academic medical centres and health systems.
In addition, they will be used for customer success and support to ensure seamless clinical integration and workflow optimisation, as well as research and development to expand the company's product portfolio and maintain technological leadership.
The company also notes that the capital raise will provide balance sheet flexibility to capitalise on growth opportunities and accelerate CT:VQ commercialisation.
The company's founder and CEO, Andreas Fouras, was pleased with the outcome of the capital raise. He said:
We are pleased to welcome several high-quality global institutional investors to our share register and sincerely appreciate the strong ongoing support from existing shareholders. This placement provides 4DMedical with the balance sheet strength to accelerate U.S. commercialisation of CT:VQ at a time when unprecedented interest from clinicians is driving rapid adoption across leading academic medical centres.
Since FDA clearance, adoption by elite institutions such as Stanford, Cleveland Clinic, University of Miami and UC San Diego has validated both our technology and our go-to-market strategy. With a strong commercial pipeline ahead of us, strategic partnerships including Philips, and now a cash position exceeding $200m, we have the resources to drive CT:VQ to become the new standard in pulmonary imaging while taking the Company through profitability and to the next set of opportunities. Importantly, we have delivered this $150m placement with less than 4% dilution, and I am excited to have taken this opportunity to increase my shareholding in the Company. We are only getting started.
Despite today's weakness, the 4DMedical share price remains up 700% over the past 12 months.
