A2 Milk Co shares fell to a three-week low as investors weighed up the company's funding needs after the board turned down a potential offer from cornerstone shareholder Freedom Foods Group and US food and beverage firm Dean Foods.
The shares fell as low as 70 cents on the NZX, and were at 72 cents shortly before midday.
A2 said it told Freedom and Dean Foods an expression of interest wasn't compelling enough to get a board recommendation if a formal bid was made.
The company was open to suitors and was evaluating interest from others.
"What is clear from the trading update, though, is in the absence of corporate interest, they will require new funding," said Matt Goodson, managing director of Salt Funds Management.
"Clearly what is affecting the stock is that the bid from Freedom and Dean Foods is not a level that the board's in a position to recommend.
"I guess for some shareholders this probably rekindles memories of three or four years ago when there was potential corporate interest and in the end it ended up just being an equity raising and sell down from existing shareholders."
The bid by Freedom and Dean Foods emerged last month and was contingent on A2 shelving plans to raise new capital.
The Auckland-based company says it will fund growth from cash flows in the first instance and has short-term debt facilities in place to support working capital needs.
Managing director Geoff Babidge told BusinessDesk the board looked at raising capital after its listing on the ASX attracted strong interest from institutions keen on investing in the company.
Those plans were shelved after the expression of interest from Freedom and Dean Foods, he said.
A2 said earnings before interest, tax, depreciation and amortisation were flat at $4 million in the 12 months ended June 30, and are forecast to rise to $12m in 2016, ahead of plan.
Salt Funds' Mr Goodson said some aspects of the trading update were weaker than expected, and others were stronger, but "overall it was fine".