Pureplay AI stock Appen gets takeover offer, share price jumps almost 30pc

Appen received a takeover offer from Canada based telco, Telus International
The offer price of $9.50 is 48% above Appen’s last closing price

Within a space of a few days, two former ASX market darlings have become takeover targets of investors keen on picking them up at depressed prices.

On Tuesday, church donor app Pushpay (ASX:PPH) received an offer from two existing shareholders, BGH Capital and Sixth Street.

BGH had recently bought a 3% stake in the company, while Sixth Street already has a 17% stake. No target price was disclosed, but the PPH stock price jumped by over 20% on the news.

And today, artificial intelligence (AI) training data services Appen (ASX:APX) also became a takeover target after receiving an offer from Canadian based telco, Telus International.

At $9.50, the offer price was a huge 48% premium to Appen’s $6.40 closing price on Wednesday.

Appen has fallen from grace recently as its share price struggled to find momentum over the past year.

Prior to today, the APX share price is down by around 40% in 2022.

Appen share price today:

The former market darling’s market cap has been reduced to a mere $800 million from over $1.3bn just a year ago, and is now in danger of being kicked out of the ASX 200 index at the next rebalancing.

What went wrong?

At the IPO round in 2015, Appen was marketed as a picks and shovels business to AI. The company had raised $15m at 50c, and listed at a market cap of just over $40m.

Appen had managed to sign major clients like Facebook, Microsoft and Google early on, as its technology was billed as the next breakthrough that could improve AI algorithms and search engines.

The company grew explosively in the four years to 2019, but that’s when revenue growth rate started to slow down.

Appen had fallen victim to the pandemic, as advertising budgets for AI projects run by Big Tech, its major clients, were reduced dramatically.

The company was also hit hard by Apple’s decision to change its global data privacy terms, a move that redirected spending away from tracking technologies like Appen’s.

In its last trading update in February, Appen announced an ambitious FY26 revenue target which is double the FY21 revenue of $447 million.

The company also flagged that significant investments are underway in transforming the business, including diversifying its revenues and expanding the product offering.

Appen is a profit making business. The company delivered $77.7m in EBITDA in FY21, and paid 10c of dividends per share in the financial year.