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Bubs Australia (ASX: BUB) is raising $28 million to help drive ambitious US growth plans with the company already hitting the half-way mark via a share placement to sophisticated investors.
The Melbourne-based baby formula manufacturer says the placement was strongly supported by Australian and international institutional and sophisticated investors.
Bubs has now opened the remaining $14 million of the raise to existing investors through a share purchase plan (SPP) which is pitched at 12.5c a share.
Bubs will apply the fresh capital to expand its Victorian production capacity to meet strong demand from US consumers.
The company last month reported US sales in the first quarter of FY24 had surged 24 per cent to $11.6 million compared to this time last year.
“On the back of the strong customer demand in USA, these funds are expected to accelerate our growth in the region,” says Reg Weine, the CEO of Bubs.
“We intend to commence our second production shift at Deloraine in January 2024, invest in sales and marketing, and progress our FDA (US Food and Drug Administration) 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.”
FDA approval is part of a plan by Bubs to seek permanent access to the US market after the US authority undertook an audit of the company’s Deloraine canning facility in Victoria last June.
The company has also completed a protein efficiency ratio study and is undertaking clinical trials in the US to firm up its position in the market.
Bubs says its brand is the number-one goat milk product in the US, with more than 280,000 tins sold in the current financial year to the end of October – up from 400,000 in the FY23 full year.
While the Bubs share purchase plan is priced at a 24.2 per cent discount to the previous Bubs closing price of 16.5c per share, the market took today’s announcement in its stride.
Bubs shares went as low as the 12.5c issue price but bounced back to be trading at 13.2c a share at 11.46 (AEDT) – down 20 per cent.
The capital raising announcement looks set to close out a tumultuous year for Bubs following the ousting of founder and CEO Kristy Carr and executive chairman Dennis Lin earlier this year.
Carr’s termination at the time was said to be ‘due to failure to comply with reasonable board directions’. It also came on the back of dwindling group revenue and poor sales in China and other overseas markets.
A board spill in July called by a group of requisitioning shareholders including Carr, Lim and Chinese distribution partners AZ Global, failed to produce the desired outcome for the disgruntled former directors.
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