My Take On Recent Happenings at STC and the Share PriceNicd rebound today: up 5.00% to 21.00.
The following are my opinions on the recent price drop:
For those scoring at home, according to my calculations, the opening post-consolidation price of an STC share is the closing price on a post-consolidation basis on Friday, November 5 (26.60), as STC began trading post consolidation on Monday November 8, so I'm using 26.60 as a point of comparison since the 1:7 share consolidation became a reaiity.
The share price remained relatively stable between that date and the November 15 after-market close press release re. the planned IPO offering and listing on the NASDAQ (shares closed at 26.75 the following day - November 16).
Then, only two days later (press release dated November 17, again after market close), STC announces that they are withdrawing their November 15 plans ".....due to market conditions........(such that) at current share price levels, the offering is no longer attractive.....".
STC closed at 25.40 November 17 just prior to that Nov 17 press release going public.
A mere two weeks later, it had fallen to a closing low of 20.00 (a drop of 21%), before today's price boost.
I suspect the main reason for this significant share price decline is the company made a major error in announcing the IPO and planned listing before they secured a formal agreement with the underwriters / others on a price per share for the new issue. I have never seen a company announce a private placement or other equity offering without first establishing what the company will receive in terms of price per share.
From the November 15 press release announcing the IPO:
"The offering will be priced in the context of the market with terms, including price per share, to be determined at the time of entering into an underwriting agreement with the underwriters."
Then, after the November 15 PR was issued, they probably found out that the price underwriters were willing to pay was likely significantly less than STC was expecting, so they had to eat crow and issue another PR just two days alter announcing they are flip-flopping on their Nov 15 announcements. While I agree with them not accepting a lowball price offering from underwriters / others, announcing something before a deal is finalized is extremely careless. I know they (and I) want the U.S. listing, but if it needs to be delayed until the time is right, delay it - don't make an announcement implying it's imminent, then retreating two days later when reality sets in.
The only question that remains is who made the call to issue that Nov 15 PR? Did the CFO (David Moore) mislead management into believing a deal had been struck on or before November 15? I read where he apparently sold 9,000 of his STC shares at an average price of 22.82 per share on November 24 - perhaps he is on his way out........? If not him, why did the company make that Nov 15 IPO announcement......? Who made the call to issue it......?
Hard to believe what I view as very competent management would make such a foolish mistake. That, and perhaps some tax loss selling during the fallout, were likely the two main reasons why the share price stands where it is today.
Hopefully this will be their last wreckless stumble, as I still view the company as significantly undervalued and well-run pre-November 15.