Why the Douugh (ASX:DOU) share price is sinking 10% today?

Investors are scrambling to sell Douugh shares as the company prepares to dilute existing shareholder value.

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The Douugh Ltd (ASX: DOU) share price is having a day to forget after coming out of a trading halt. This comes after the financial wellness app provider announced an update on its recent share placement.

During mid-morning trade, Douugh shares are down 10.84% to 7.4 cents. This means that the tech company’s shares have fallen more than 20% in the past week alone.

What’s dragging Douugh shares lower?

Investors are scrambling to sell Douugh shares as the company prepares to dilute existing shareholder value.

According to its release, Douugh advised it has received firm commitments to raise $5.5 million through a share placement.

The company presented the offer to institutional and sophisticated investors at an issue price of 7.2 cents per share. This equates to roughly 76.4 million new ordinary shares being added to the company’s registry.

In addition, Douugh launched a share purchase plan (SPP) for retail investors under the same terms as the placement.

Seeking to raise a further $2.5 million, the SPP will be available to apply for starting tomorrow (7 December).

Together, Douugh expects the capital raising efforts to generate $8 million to accelerate user and revenue growth. This includes investment in research and development as well as marketing initiatives.

Douugh founder and CEO Andy Taylor commented:

We are delighted to have received this support from investors to be able to kick-off the AU integration with Railsbank and continue to build on the strong momentum we are showing in the US. In October, we increased our US customer base by 42% and revenue by 53% month-on-month, with November proving to be just as solid.

With the launch of our new Douugh Rewards offering this week in time for Christmas spending, the Crypto investing feature under development as well as a couple of major enhancements to the core product, we are well positioned in the coming months to further improve our activation rate to increase our revenue profile.

About the Douugh share price

Over the past 12 months, the Douugh share price has plummeted by more than 70%. The company’s shares reached a 52-week low of 5.9 cents in October, before moving in circles since.

On valuation grounds, Douugh commands a market capitalisation of around $33.57 million, with roughly 453.7 million shares on issue.

Should you invest $1,000 in Douugh right now?

Before you consider Douugh, you'll want to hear this.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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