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Archer Share Price Drops 9% as it Raises Fresh Capital (ASX:AXE)

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By Ryan Clarkson-Ledward, Monday, 04 October 2021

Semiconductor and quantum computing stock Archer Materials Ltd [ASX:AXE] is sliding into the red today. At time of writing, the AXE Share Price is down 9.22%...

Semiconductor and quantum computing stock Archer Materials Ltd [ASX:AXE] is sliding into the red today.

At time of writing, the AXE Share Price is down 9.22%, extending losses from an already poor performance last week. Dragging the share price down to lows not seen since August.

Let’s take a closer look at the reason for this downward momentum…

Fresh capital at a cost

Today’s sell-off of AXE stock can be blamed squarely on management’s latest capital raise. Garnering $15 million from institutional investors for ongoing R&D and operational costs.

However, with an offer price of $1.45 and 10.3 million new shares set to be issued, the dilution for existing shareholders will be noticeable. A detail that clearly wasn’t lost on investors in trading today.

Nevertheless, management was clearly trying to portray the positives. As Executive Chairman, Greg English comments:

‘We are very pleased with the overwhelming support received in the Placement in this transformational moment for Archer. We thank our existing shareholders for their ongoing support and welcome a number of new, high-quality institutional investors to our register, supporting our journey towards developing the next generation of semiconductors that could spur breakthrough solutions like quantum computing.’

An important reminder, as to the explosive potential of this stock. Because if they truly can deliver a quantum computing breakthrough, capital raisings will likely be the last thing on investors’ minds.

Plus, given the fact that AXE shares are still up 203% year-to-date, long-term holders are still sitting pretty. No doubt waiting for this stock to deliver on its exponential potential and soar to new heights.

Discover our top three ASX-listed pot stocks in 2021. Click here to learn more.

What’s next for the Archer Share Price?

Archer’s core focus is still the ongoing development of its CQ quantum computing chip, as well as Biochip technology. Two ‘world-class’ solutions that it believes could upend the computing and electronics markets.

However, these kinds of high-tech developments will take time to mature. Which is precisely why Archer needs more time and money.

It is simply up to investors to decide if they’re willing to pay a massive premium for this potential. Because until Archer actually finalises a chip design or commerical product, no one really knows just how disruptive it will be.

For that reason, this is a highly-speculative stock. And if that isn’t your cup of tea, well then there are plenty of small-cap opportunities that aren’t quite so risky. You can check out our report on four overlooked and promising small-cap stocks, right here.

Regards,

Ryan Clarkson-Ledward,
For Money Morning

PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

Ryan Clarkson-Ledward

Ryan’s Premium Subscriptions

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All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in our reports are forecasts and may not be a reliable indicator of future results. Any actual or potential gains in these reports may not include taxes, brokerage commissions, or associated fees.

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