Shop and drop

An observation.

Stride Arcolab has acquired a 17% stake in Genepharm Australasia (here). The news article in Economic Times says that the shares were issued to Stride at A$0.55 (as against an original price of A$0.60).

How would you read into any situation where the seller reduced the price of a product? The 8% discount in acquisition price was on account of trading results and share performance, says the article. I peeked at the Genepharm Australasia stock chart on the Australian Stock Exchange (here). To my surprise, the stock has been going down from the day the company announced Stride Arcolab's 2.2% stake. The stock was priced at A$0.46 then. Currently, it is priced at A$0.22 (a drop of 52%). The EPS of the stock (trailing 4 qtrs) is A$0.15 .. which puts the stock at a PE of 1.5x.

I am surprised that Genepharm Australasia actually dipped so much inspite of a healthy news like this : Genepharm Australasia Ltd. reported earnings results for half year ended December 2007. For the period, the company reported net profit of AUD 1,343,000 or 0.9 cents per diluted share on net sales of AUD 32,174,000 compared to net loss of AUD 664,000 or 0.5 cents loss per diluted share on net sales of AUD 25,081,000 for the same period a year ago.