Digi Communications shares reached a new low on Bucharest Stock Exchange (BVB) yesterday at RON 27.45 and it has rebound a little today at RON 27.6. It is not a good period for the cable and mobile operator, after being accused of lying in the IPO prospect by Darius Valcov.
There is a 32 percent drop from the price of shares at the moment of listing on BVB for Digi. This could a loss for any investor if it is closed, meaning if it sales the share at this price. There is no one reason for the drop of Digi quote, but a bunch of reasons.
„After the listing, the company was in a law suit, an investigation, and for some institutional investors this is a reason to exit a position. Some funds have this in their investing management and when something like this happens, they close the position,” says Gabriel Aldea, director of Brokeraj Department at Tradeville.
This is the first reason why the shares have dropped last year. Another reason is that many investors are looking only at the trend of the shares and when they see that it does not stop, they also sell, regardless of any other analysis.
”Another one it might be the financial results of the company; usually, in the IPO, it is showed that the financial results will be on an upward trend in the next years and when that does not happen, investors are disappointed and they are selling the stock”, says Aldea.
For the first half of the year, Digi reported a net profit that is 50 percent less than the one from the same period pf the last year.
And there is also the level of indebtedness, with EUR 1.3 billion in liabilities, considered to be too high.
But the level of indebtedness is not higher than the companys asset value and, also, it is not higher than the debt other companies in the same sector have. This is why the Brokers Association release a statement about the declarations made by Darius Valcov.
“There is a need for greater caution as regards the public statements regarding the listed companies. With concern that lately publications have been published in the public domain about the companies listed on the stock exchange by representatives of the Government, the Association of Brokers from the capital market signals the possible influence that these statements may have on the price of the shares of those companies, which will lead to negative effects in terms of investor protection and the smooth operation of the market,” said the Brokers Association.
In other words, the stock market investors are very sensitive are prone to act on rumors, so negative declarations would only make for new sells and deepen the downward trend.
Is this a moment to sell the stock? ”No one makes this kind of recomandation. It is every investors decision. The trend can go up with no warning, just as it goes down right now”, says Aldea.