THINKING OUT LOUD

Tuning In To Adverse Price Movements

21 October 2019

by Rob Zdravevski

I don’t closely follow Treasury Wines (TWE:ASX) anymore though observing the stock fall from $19 to $16.40 (14%) or equivalent to losing approx. $1.4 billion in market, because its CEO is resigning, seems like an extraordinary over reaction.
 
I mean, the company does $2.8 billion in revenue and one person resigning just wiped out 15% of the company’s worth, and equal to 50% of the year’s sales……
 
Of course, the analysis required should be deeper than this. For example, was the stock overvalued prior to this announcement and a host of other scenarios and questions should be asked.
 
But nevertheless, adverse moves are sometimes worth digging deeper into the real cause or attributable value of the action.