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Why the Bubs share price tumbled 7% lower today

The Bubs Australia Ltd (ASX: BUB) share price is on course to finish the week in the red.

In morning trade the infant formula company’s shares are down 7% to 99.5 cents.

Why is the Bubs share price tumbling lower today?

The Bubs share price has come under pressure on Friday after successfully completing its placement to institutional, professional, and sophisticated investors.

According to the release, Bubs raised $30 million before costs, at a price of 95 cents per share. This represents an 11% discount to its last close price.

The company will now push ahead with a share purchase plan aiming to raise a further $5 million at the same price as the placement.

Why is Bubs raising funds?

Bubs is raising the funds to take advantage of future growth opportunities and accelerate its customer acquisition in both new and existing markets.

In addition to this, the funds will go towards advancing new product developments and meeting merger and acquisition commitments.

The company’s executive chairman, Dennis Lin, was very pleased with the response to the capital raising.

He said: “We are very pleased with the capital raising which investors share our vision, with a mix including our cornerstone and new institutional long-only investors.”

“Funds raised through the Placement and SPP will be used to improve the Company’s financial flexibility to take advantage of future growth opportunities, accelerate customer acquisition in existing and new markets, advance new product development and meet M&A commitments reflective of the scale we want to achieve and the surrounding market environment,” he added.

Bubs’ founder and CEO, Kristy Carr, believes the capital raising will allow the company to take advantage of data driven marketing.

She said: “Looking ahead, 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 to cater for a growing market for science-based adult formulations,” the CEO added.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BUBS AUST FPO. 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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