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A group of dissident shareholders at Bubs Australia (ASX: BUB), including founder Kristy Carr who was unceremoniously removed as CEO last month, has lodged a formal request for an extraordinary general meeting aimed at removing the entire board.
Carr announced the 'SAVE OUR BUBS' campaign on Wednesday afternoon, confirming plans to nominate former A2 Milk Company (ASX: A2M) CEO Asia Pacific Peter Nathan as the new CEO and managing director, while also highlighting the acumen of proposed directors James Jackson and Rupert Soar.
Today the company reported it had received the request to call a meeting to vote on the proposed removal of chair Katrina Rathie, as well as other directors Steven Lin, Paul Jensen and Reg Weine.
It is understood that the independent board was at odds with Carr and former chair Dennis Lin over their strategy in the Chinese market, where a daigou distribution deal was signed in March 2022 with Hong Kong-headquartered Alpha Professional Holdings and its subsidiary Willis Trading.
That deal entailed a conditional share issue - worth around 4.82 per cent of issued capital at the time - for Willis and Alpha, provided they hit purchase milestones of at least $50 million in FY22 and at least $80 million in FY23.
What transpired however was a rapid pivot to redirect some of those planned purchase orders to fill shortages in the US under what was known as "Operation Fly Formula". The share subscription agreement was then lowered both in the number of shares (1.56 per cent of issued capital) and the minimum purchase receipts at $44 million, which needed to be paid before mid-August last year.
A trading update released today by Bubs Australia indicates Alpha Professional Group subsidiaries have struggled to move volume in China, where revenue was down 56 per cent year-on-year in the third quarter "with significant amounts of finished goods still held in trade, predominantly Bubs Supreme".
Bubs Supreme was developed for exclusive distribution in China by Alpha subsidiaries Alice Trading Limited and AZ Global, the latter being one of the shareholders along with Willis that is taking part in the 'SAVE OUR BUBS' campaign.
The company reports sales in April and May continue to remain below expectations in China, and the current exclusive distribution agreement with Willis for Bubs Goat IMF, Organic Grass Fed IMF and Caprilac Adult Goat Nutrition will conclude at the end of this month.
"Bubs is working hard to improve the distribution and sell through in China," the company noted.
"Mr Jackie Lin, an experienced Chinese-Australian executive with a strong understanding of the Chinese FMCG (fast moving consumer goods) and infant formula markets has been seconded to Bubs to help the board lead a strategic review of China operations.
"The company has already made significant progress on right sizing the cost base supporting the China business and resetting the China strategy with a view to creating a truly diversified multi-channel approach."
In other markets, Bubs is forecasting net revenue in the US to almost triple in FY23 to $20-22 million, while net revenue in Australia is set to rise by at least 12 per cent to $14.5-14.9 million.
The company had $29.2 million in cash reserves as of 31 May 2023.
Following the notice from the dissident shareholders, who combined hold 5.04 per cent of voting shares in the company, Bubs Australia must call a general meeting within 21 days of receiving a valid requisition and hold the meeting no later than two months after receipt of the requisition.
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