Fast-growing infant formula exporter Bubs Australia (ASX: BUB) surprised the market with an announcement that it was raising $35 million from existing investors at a big discount to the current share price.
The company, which has been moving at high velocity this year expanding into the Chinese infant formula market and expanding its sales of goats milk products, will raise $30 million in a placement to existing shareholders at 95 cents.
The company will will also offer a public share purchase plan aiming to raise a further $5 million.
The company’s share price immediately tanked seven per cent to 99.5 cents, before recovering to $1.07.
With the company now in a trading halt until December to cater for the raising, institutional, professional, and sophisticated investors appear to have received a very nice Christmas bonus of cut-price shares.
The cash will accelerate growth opportunities and customer acquisition, and pay for new product developments and meeting merger and acquisition commitments.
The acquisition targets have not been shared with the public.
Bubs CEO Kirsty Carr said: “Following the capital raising we intend to take advantage of increased data driven marketing initiatives for the Bubs portfolio across our e-commerce and 020 channels, aligning ourselves with partners that are focused on data to maximise efficiency and targeting of key demographics.
“We will also be developing an innovation pipeline to expand our reach into segments beyond infant formula and toddler nutritionals to the $1 billion per annum Chinese junior 4 to 7 year-old nutritionals markets, and into expanding goat dairy brands.”
Bubs roller coaster ride in 2019 has seen its shares plunge as low as 45 cents, but there is no doubting the enormous inroads it has made into alternative Chinese markets, driven by a good understanding of Chinese consumers among directors and management.
The company’s executive chairman, Dennis Lin is talking of further scaling up the Bubs business, which is based on Australian and New Zealand goats milk processed in Australia into its CapriLac, Coach House Dairy and Bubs Organic brands.
Subscribe to our free @AuManufacturing newsletter here.