Shares in Eve Sleep collapsed on Thursday after the online mattress brand said investors taking part in a £15 million fundraising plan will buy in at a steep discount.
The group said it has secured commitments from existing investors amounting to just shy of £10 million, with veteran fund manager Neil Woodford pledging £8 million and chairman Paul Pindar chipping in £1 million.
Channel 4 will contribute £900,000, and all are buying new stock at 10p per share, a 30% discount to Eve’s closing price on Wednesday.
However, when Eve first announced the fundraising, it said that existing shareholders would buy in at a price that is “significantly higher than the prevailing share price”.
The mattress firm has also so far failed to raise £15 million in funding it originally said it would, although it remains in talks with other interested parties to fund the shortfall.
Shares in Eve fell more than 20% to 11.25p following the update.
Eve also said that trading has been “strong”, with the group experiencing a “very good” Black Friday period.
Revenues for the 11 months to November 20 stand at approximately £33 million, and the company anticipates it will deliver sales above market expectations for the full year.
As part of the fundraising, Mr Woodford’s new investment, through his firm Woodford Investment, would see his stake in Eve rising to 42% and trigger a mandatory takeover, but the firm said it is applying to allow shareholders to waive the obligation.
Last month Eve signalled a move away from heavy marketing as it kicked off the fundraising plan.
It came months after co-founder Jas Bagnieowski abruptly left the company, as Eve admitted its strategy of expanding quickly overseas had not met expectations.
New chief executive James Sturrock has completed a review of the business and plans to focus on building deeper relationships with customers in the core markets of France, the UK and Ireland.
Mr Sturrock said on Thursday: “Whilst the fundraise is not yet completed and is subject to a short delay, the board remains confident of delivering the investment from existing, new and potentially strategic investors which is required to deliver the business strategy.
“We look forward to putting the business on a stronger footing with a view to establishing Eve as a leading sleep and well-being brand.”