Why is the Brainchip share price sinking over 7% today?

The Brainchip Holdings Ltd (ASX: BRN) share price is having a tough session.

In morning trade, the struggling semiconductor company’s shares were down as much as 7.5% to 30.5 cents.

They have since recovered a touch but remain down 6% at the time of writing.

What’s going on with the Brainchip share price?

This morning’s weakness has been driven by another capital call notice from Brainchip this morning.

Unlike most listed companies that raise funds though capital raisings, Brainchip has a put option agreement with a company called LDA Capital.

According to the release, the company has submitted a capital call notice to LDA Capital to subscribe for up to 40 million shares.

Under the Third Amendment of its Put Option Agreement, Brainchip is obligated to advance these shares to LDA no later than 31 March 2024.

The issue price for the shares will be 91.5% of the higher of the average daily volume weighted average price of shares over the pricing period and the undisclosed minimum price notified to LDA Capital by the company.

The pricing period for the Capital Call Notice will begin on 28 March 2024 and will end on the sooner of 7 June 2024 or when the shares have been fully subscribed by LDA Capital. The agreement also allows extensions to the pricing period upon request in the event unsold shares remain at the pricing period ending date.

Brainchip advised that as of the date of the capital call notice, available funding under the agreement amounts to $50.2 million. It is committed to drawing down a minimum of $12 million no later than 31 December 2024.

The company’s underfire CEO, Sean Hehir, commented:

The proceeds raised from the capital call will be used to solidify our go-to-market capabilities by augmenting our machine learning personnel and solution architects who are necessary to support accelerating market adoption of the Akida 2.0 IP offerings.

The company will also bolster the CTO function, enabling radical innovation required to bring large language models, multi-modal operation and other state of art AI to the edge and ensure we remain the industry leaders in hyper-efficient Edge AI.

Investors appear to believe this is an indication that meaningful revenue generation is still some way off (if at all).

The Brainchip share price is down 34% over the last 12 months.

The post Why is the Brainchip share price sinking over 7% today? appeared first on The Motley Fool Australia.

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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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