The Bubs Australia Ltd (ASX: BUB) share price has continued its rollercoaster ride on Friday.
After sinking as much as 7% in early trade, the infant formula and baby food company's shares have now surged higher.
At the time of writing the Bubs share price is up almost 14% to 70 cents.
What happened?
Up until this morning the company's shares had been in a trading halt pending completion of an institutional share placement.
This has now completed successfully, raising approximately $16 million (before costs) at 45 cents per share.
According to the release, the proceeds will be used to improve its financial flexibility and working capital in order to take advantage of future growth opportunities.
Why did it fall and then rebound?
It appears as though initially investors were disappointed that the placement came at a significant discount to the last close price of 61.5 cents. That's a 27% discount and is reasonably dilutive for existing shareholders.
However, they have quickly had a change of heart and appear to be pleased that a cashed up Bubs can now concentrate on taking on a2 Milk Company Ltd (Australia) (ASX: A2M) in the lucrative Chinese infant formula market.
Should you invest?
As I have said numerous times before, I think Bubs has enormous potential and has positioned itself extremely well.
But ultimately it will come down to whether or not the brand resonates with Chinese consumers. With such a lot of success already built into its share price, I would suggest investors hold off an investment until sales data shows that the company is living up to the market's lofty expectations.
