Wow! The Punter thought he was being cheeky last week, offering to buy shares in the organic baby food company Bubs Australia (ASX code BUB) for only 61 cents, when they were trading about 77c.
His order was quickly filled as the share price crashed 26 per cent overnight. The company had sold 35.45 million new shares for a mere 45c each, more than 40 per cent below the market price.
Two things about this make the Punter cross. First, the shares were sold privately to the rich and well connected (a private placement to sophisticated and institutional investors), with no suggestion individual investors would be offered the same deal. It is another example of how the market is run by and for the big players, with smaller investors trading at a disadvantage.
News of the placement clearly leaked – shares were suspended from trading and the news officially announced only after the big fall.
There was no hint a share issue was planned. The company in its quarterly report at July’s end said: “Bubs Australia continues to maintain a healthy balance sheet with A$5.3 million in cash reserves as at 30 June 2017, with no debt outside of existing trade partners.”
Secondly, news of the placement clearly leaked – shares were suspended from trading and the news officially announced only after the big fall. The 45c price may look cheap but it takes time to organise a placement, and that was about the market price a month ago, before takeover rumours sent BUB soaring. Nevertheless it was a windfall for those in the inner circle. Wailing like a bub who hasn’t been fed, the Punter has dumped his BUB shares at a small profit. He takes consolation from the fact his Sea Farms Group (SFG) shares are up 20 per cent following news its indigenous land-use agreement has been given the nod by Native Title holders, and project development agreement for the proposed Sea Dragon prawn farm has now been finalised with the Northern Territory government.
The short-lived but sharp fall in the market as a whole on one day last week is perhaps a warning that this would be a good time to take profits. Except, perhaps, in gold shares, since the bullion price has at last moved above $US1300 an ounce.
- The Punter has no financial qualifications and no links to the financial services industry. He owns shares in a number of companies featured in this column.
