Why is the Bubs share price sinking 7% on Friday?

The Bubs Australia Ltd (ASX: BUB) share price is heading south following the company’s retail component update.

At the time of writing, shares in the infant formula company are swapping hands at 58.5 cents, down 7.14%.

Bubs shares drop on equity raising efforts

So far, it’s been a disappointing day for the Bubs share price with investors hitting the sell button.

In its release, Bubs advised it has completed its retail entitlement offer.

The pro-rata accelerated non-renounceable entitlement offer raised a total amount of around $22.9 million.

For every Bubs share owned, eligible retail shareholders could pick up 10.42 Bubs shares at a price of 52 cents apiece.

Valid applications for approximately 12.7 million new shares, worth roughly $6.6 million were received by Bubs.

The remaining 31.3 million new shares not taken under the retail entitlement offer will be allotted to the sub-underwriters.

Together with the institutional component of the entitlement offer and the $40.1 million institutional placement, Bubs has raised $63 million.

The proceeds of the equity raising are expected to be used for a number of strategic initiatives. This includes:

• Working capital to assist with the immediate scale up of group activities due to rapid market expansion
• Building up inventory levels given the current logistics environment
• Operating expenses for the US market (marketing, administration, employment costs, and consultancy fees)
• Expand canning capability at the Deloraine facility to meet growing demand
• Covering the costs associated with the equity raising

Bubs share price snapshot

Despite a challenging 12 months amid COVID-led channel disruptions, the Bubs share price has accelerated almost 30% over the period.

The company’s shares touched a 52-week high of 84.6 cents on 30 May following a supply agreement with the US.

However, since then, its shares have retraced due to market volatility across the ASX which weighed down Bubs shares.

Based on today’s price, Bubs commands a market capitalisation of around $400.17 million.

The post Why is the Bubs share price sinking 7% on Friday? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras 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 recommended BUBS AUST FPO. 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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