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Why Bubs Australia Ltd (ASX:BUB) is betting $40m on a China expansion

Bubs Australia Ltd (ASX: BUB) announced today the successful completion of an oversubscribed share placement, raising $40 million at $0.75 per share.

The infant formula and goat dairy products supplier is pushing to expand into China through strategic partnerships with local operators in that market including Chinese e-commerce giant Alibaba.

Proceeds from the share placement will be used to increase working capital, marketing, product development, capital expenditure to enhance the company’s push towards vertical integration and KPI payments to vendors who meet their targets.

The placement will result in the issue of 53,500,000 new shares in Bubs Australia and will dilute existing shareholders.

The Bubs share price was down 6% following the announcement to $0.84.

Bubs shareholders will be hoping the China move will boost the company’s share price as it has for A2 Milk Company Ltd  (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL).

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Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can find Kevin on Twitter @KevinGandiya.

The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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