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.
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