Continuous disclosure was supposed to minimise shocks in the stock market and prevent wild gyrations in share prices. After one of last year’s two profit seasons, some regulators triumphantly declared that share price fluctuations after results announcements were the lowest in years, suggesting continuous disclosure was working well.
But the past couple of weeks has shown that big share slides still happen, and only yesterday Mirvac shares crashed 12% after warning that profit would fall 8% this year. The phenomenon now seems to be a profit warning rather than a surprise profit result. At one level this is an improvement because information is being brought out earlier than before. But the size of the subsequent share price slides suggests that we’re still a long way from perfect information in the market.
Any one-day share price move of more than 10% is a cause for concern, but as this list from the past year shows, it remains an all-too-frequent event:
Paperlinx: shares in the world’s largest paper distributor plunged $1, 26%, to $2.82 on Monday after warning of a 20% profit slide.
PMP: down 24.5% from $1.85 to $1.40 after last month revealing a 15% downgrade for 2004-05.
Pacifica: down 47c, or 23%, to $1.55 after a 40% profit downgrade for 2005 in April due to slower car sales in Australia and the US.
Leighton Holdings: shares fells 21% in one day last May after a profit warning related to Spencer St and the Sydney Hilton contracts.
Virgin Blue: slumped 13% to $1.74 on 19 January this year after warning profit would be 10-15% below the $158 million made last year.
Wattyl: fell 30c or 12.75% to $2.05 last Monday after a profit warning.
Mirvac: the developer and property fund manager issued a profit warning yesterday and fell 49c, or 12%, to a three-year low of $3.73.
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I’m a keen follower of troubled stocks and have this morning bought about $500 worth of shares in each of Virgin Blue, Wattyl, Mirvac and Paperlinx. If you have a profit warning, we’ll buy some shares and drop by for a chat about it at your next AGM.