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Why you should watch Bubs Australia shares this week

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The Bubs Australia Ltd (ASX: BUB) share price is one to watch this week as the company looks to shareholders for more cash. In morning trade, Bubs shares have already dropped 1.99% to $0.98 per share at the time of writing.

The group is undertaking a share purchase plan (SPP) to raise up to $5 million. The issued shares will rank equally with existing shares and will be raised at $0.95 per share. This is an 11.8% discount on the volume weighted average Bubs Australia price over the last 5 days.

Why is Bubs raising the money?

Bubs shares entered a trading halt last Friday after announcing the $30 million capital raising plans.

The additional $25 million was to be raised from institutional, professional and sophisticated investors.

Bubs is raising the capital to improve its financial flexibility and capitalise on future growth opportunities. Greater customer acquisition, new product development and meeting M&A commitments are also behind the SPP.

What has Bubs been up to in 2019?

The Bubs Australia share price has rocketed more than 113% higher since the start of January, largely thanks to the group’s Asian expansion.

Bubs launched its Beingmate joint venture in Shanghai and is now selling its organic cow’s milk infant formula in Australia via its Chemist Warehouse alliance.

The group’s deal with Alibaba in China has opened up a huge potential growth corridor for further sales. Bubs launched its Deloraine goat milk formula in Asia and has expanded its foootprint in Vietnam this year.

How have Bubs Australia shares performed this year?

The Bubs Australia share price has been rocketing higher this year, but it’s not the only dairy group to enjoy huge gains.

Fellow ASX-listed dairy shares such as Bellamy’s Australia Ltd (ASX: BAL) and A2 Milk Company Ltd (ASX: A2M) have also performed well.

Bellamy’s shares have skyrocketed following its acquisition by China Mengniu Dairy Company this year. The $1.5 billion takeover was approved by the courts yesterday and Bellamy’s is set to exit the ASX in December.

a2 Milk shares have proven they’re still an ASX growth investor’s dream and have climbed 34.33% higher this year.

The group’s shares are now up 2,394.64% since April 2015, meaning the Bubs Australia share price has a lot of work to do to catch up.

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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. 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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