It certainly has been an eventful period for Bubs Australia Ltd (ASX: BUB) and its shareholders.
During the last 12 months, the embattled infant formula company has expanded into the United States market, seen its sales in China collapse, kicked out its management team, and is now in the middle of a boardroom battle.
This has ultimately resulted in the Bubs share price losing 70% of its value over the last 12 months.
As a comparison, the A2 Milk Company Ltd (ASX: A2M) share price has risen 16% over the same period.
Could things change in the future and put pressure on the A2 Milk share price?
Firstly, under the previous management of Dennis Lin and Kristy Carr, Bubs was arguably one of the worst-run companies ever seen on the ASX boards.
For years, the company has been generating cash receipts that were less than the cost of manufacturing and hyping up new product launches that seemingly flop immediately. Vita Bubs anyone?
In order to survive its rampant cash burn, Bubs has been forced to continuously raise funds from investors, ballooning its share count and destroying shareholder wealth.
The Bubs board revealed the shocking extent of this destruction this week. It said:
Since the Company's IPO on 3 January 2017 and during the tenure of Mr Dennis Lin and Ms Kristy Carr, the Company has accumulated losses of $240 million and raised capital seven times, with investors in each of those capital raisings suffering a material decline in the value of their investment, ranging from -59% to -81%.
A change at the top
It is no wonder, then that in April, the Bubs board took decisive action by replacing the company's chair and then terminating the contract of its CEO soon after. The Bubs board explained the move:
The Board made these necessary changes as a result of significant deterioration in Bubs' recent financial performance, undisciplined expenditure and the long-term decline in shareholder value presided over by the ex-Chair and ex-CEO including failing to comply with reasonable Board directions.
However, Carr and Lin don't seem to believe they did a bad job, despite what the figures say. Together with a group of shareholders, they are pushing for another board overhaul and a change of CEO. After which, with board control, it wouldn't be a surprise if they seek to find a way back in at a later date.
Another change?
In respect to the change of management, these shareholders want to install former A2 Milk Asia-Pacific boss, Peter Nathan, as the new CEO.
And while he certainly does have a lot of experience, he didn't exactly leave A2 Milk in a great position.
Nathan exited the company the same day it announced a major stock provision of approximately NZ$80 million to NZ$90 million in response to poor inventory management in the daigou/reseller and CBEC channels.
It is also worth remembering that A2 Milk shareholders were left disgruntled when Nathan, along with several other executives, sold millions of dollars of shares around the 2020 peak in August. It was all downhill from there for its shares after the company's performance deteriorated materially.
The Bubs board is against his appointment. It explains:
The requisitioners have put forward Peter Nathan as proposed CEO. Mr Nathan previously worked for a2 Milk, which is currently a defendant in two shareholder class actions which relate to continuous disclosure obligations and making allegedly false and misleading statements in connection with the deterioration in a2's sales in China, during the period when Mr Nathan was Chief Executive Officer Asia Pacific. The Board believes the ongoing class actions present significant reputational risks for Bubs at a critical time when it is seeking FDA approvals in the US and reviewing its China strategy.
Shareholders will be asked to vote on these matters on 27 July. If its long-suffering shareholders vote in favour of the current board, hopefully, that will bring this ordeal to an end and let the company focus on fixing the damage previous management left behind.
Maybe then Bubs could pose a threat to the A2 Milk share price.
