Why is the Bubs share price crashing 24% today?

This infant formula company's shares are falling heavily on Friday.

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The Bubs Australia Ltd (ASX: BUB) share price has returned from a trading halt and crashed deep into the red.

In morning trade, the infant formula company's shares were down as much as 24% to a multi-year low of 12.5 cents.

Its shares have recovered a touch since then but remain down 18% to 13.5 cents.

Why is the Bubs share price crashing today?

Investors have been selling the company's shares today after it completed the institutional component of yet another capital raising.

According to the release, Bubs has received binding commitments for $14 million via a placement of 112 million new Bubs shares to sophisticated, institutional, and professional investors.

Bubs raised the funds at 12.5 cents per new share, which represents a 24.2% discount to its last close price.

The company will now push ahead with a share purchase plan that aims to raise a further $14 million at the same price.

Why is Bubs raising funds again?

Bubs advised that the funds raised from the placement and share purchase plan will allow it to accelerate growth in the USA, invest to expand production to pursue growth and seek permanent access to the USA infant formula market.

Bubs CEO, Reg Weine, said:

We are delighted to have successfully completed the Placement. On the back of the strong customer demand in USA, these funds are expected to accelerate our growth in the region. We intend to commence our second production shift at Deloraine in January 2024, invest in sales and marketing, and progress our FDA approval.

We thank our existing shareholders who participated and welcome the new shareholders to Bubs. We are grateful to our shareholders for their continued support, and are pleased to offer shareholders the opportunity to participate in the capital raising via our SPP.

The Bubs share price is down 63% over the last 12 months.

Motley Fool contributor James Mickleboro 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 Scott Phillips.

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