Unfortunately for its shareholders the Bubs Australia Ltd (ASX: BUB) share price has continued to sink lower.
At the time of writing the fledgling infant formula and baby food company's shares are down almost 8% to 54.5 cents.
Incredibly, just three weeks ago the Bubs share price came within four cents of hitting $1.00.
Why are its shares lower?
A key catalyst for this decline was a $16 million institutional share placement at 45 cents per share at the end of last month.
This was a sizeable 34% discount to its share price at the time of 68.5 cents. In my opinion, such a large discount indicates that management wasn't able to justify the company's lofty valuation to these institutional investors.
Furthermore, another reason its shares almost hit $1.00 was speculation of Bubs being a takeover target. This was dismissed by management, leading to a significant drop in its share price.
Should you buy the dip?
Whilst it may be wishful thinking, I would suggest investors hold off an investment and wait for an opportunity to pick up shares at around 45 cents. I think at this level it provides investors with a much better risk/reward.
In the meantime, investors may be better off grabbing a slice of rival a2 Milk Company Ltd (Australia) (ASX: A2M).
