The Candy Club Holdings Ltd (ASX: CLB) share price is falling today after the company raised $20 million via private placement and debt financing. At the time of writing, the Candy Club share price is trading at 23 cents per share.
Candy Club is a confectionary retailer. The business primarily engaged in both business-to-consumer (B2C) and business-to-business (B2B) markets. Candy Club is established in the US market, however, it also has an Australian presence.
Under its B2C business, the company sells subscriptions plans for its Candy Boxes in the USA. Furthermore, the B2B business involves the selling of Candy Club branded confectionery to specialty market resellers in the USA.
Why is Candy Club raising the capital?
Candy Club's announcement today is regarding the successful completion of an institutional placement. This comes from the issue of 48.6 million fully paid ordinary shares at 22 cents per share to raise approximately $10.7 million before costs.
Candy Club's wholly-owned US subsidiary, Candy Club Holdings Inc., has also secured US$7.5 million (A$9.84 million) in debt funding. This comes from Venture Lending & Leasing IX Inc. who is a part of a leading Silicon Valley equity/debt venture firm called Western Technology Investment (WTI).
Candy Club says the capital raised is "to be invested in considerably scaling the business". The funds raised under the placement will be used for:
- Acquisition of Inventory – $4.4m
- Customer Acquisition Lead Generation campaigns – $1m
- CAPEX – $500k
- Increased Sales Staff – $500k
- General Working Capital – $3.8m
- Costs of the offer – $500k
What Candy Club management said
Candy Club chair James Baillieu explained the debt and placement combination:
By bundling the WTI debt deal with the placement, we substantially reduced the amount of shareholder dilution to reach our new capital target, as well as raising from institutions and sophisticated investors a large amount of equity successfully at only a small discount to market price.
Candy Club share price snapshot
The Candy Club share price losses today are part of a broader trend. Furthermore, the company's share price has declined by 12% this month.
However, this comes against large gains over the past 12 months. Candy Club's share price has risen 528% in that timeframe, beating the consumer defensive sector by 525%.
It's also up 67% in 2021 so far.
