Newcrest dragged down
Despite a stable gold price, shares in Newcrest have slipped more than 4 per cent over the past two trading days as controversy rages over briefings the company gave analysts in the weeks leading up to a major corporate restructure on June 7.
Newcrest has denied revealing market sensitive information, but has not denied that briefings took place.
ASIC and the ASX are investigating why the Newcrest share price lost almost 15 per cent of its value in the 72 hours before the restructure was made public, and also why numerous analysts downgraded the stock over the same period.
Newcrest shares have fallen on five of the past six trading days since June 7, despite the gold price being steady during that time and no other clear catalysts beyond the disclosure scandal emerging.
When asked if those falls and Tuesday's 20¢ fall to $11.15 were likely to be related to the disclosure speculation, Shaw Stockbroking analyst Vincent Pisani said "absolutely".
"If there is going to be any suspicion of wrongdoing, a lot of fund managers would think if they hold the stock knowing full well that there could be an inquiry, then they've got to justify that to their trustees," he said.
"There is no way in the world that you would walk in front of a trustee meeting and say 'I'm still holding Newcrest', only to hear 'Don't you know all this stuff is going on?'
"People are conservative and say, 'I'm going to take a loss and at least I can justify it because there may be an inquiry."'
Mr Pisani said the stock would be a good buying opportunity at current prices if the company was cleared of any wrongdoing, but there had been no sign of that yet.
"Not a lot of people want to buy a stock if there is a hint or a question mark on selective briefings, if that was done," he said.
Newcrest shares have been sliding for much of the past nine months on the back of repeated gold production downgrades.
A well-placed observer said the disclosure scandal was exacerbating the credibility problem that Newcrest developed after the repeated downgrades. "If you lose some credibility, it has a very negative impact," he said. "They must be conscious of that."
Frequently Asked Questions about this Article…
Newcrest shares have slipped after speculation about selective briefings to analysts ahead of a major corporate restructure on June 7. The stock lost almost 15% in the 72 hours before the restructure was announced and has fallen on five of six trading days since June 7, with a recent 20¢ drop to $11.15. The falls come despite a steady gold price, and market watchers point to the disclosure controversy and prior production downgrades as key drivers.
The controversy centres on briefings Newcrest gave to analysts in the weeks before its June 7 restructure. Newcrest says it did not reveal market‑sensitive information but has not denied that briefings occurred. That has fuelled speculation that selective information may have been shared, damaging investor confidence.
Yes. The Australian Securities and Investments Commission (ASIC) and the ASX are investigating why Newcrest’s share price fell almost 15% in the 72 hours before the restructure was made public and why numerous analysts downgraded the stock over the same period.
Several analysts downgraded Newcrest in the period around the restructure. Shaw Stockbroking analyst Vincent Pisani said many fund managers became conservative and sold stock to justify that decision to trustees if there was even a hint of possible wrongdoing, which contributed to the sell‑off.
No — the article notes the gold price was steady during the recent sell‑offs. Market watchers say the disclosure speculation and company‑specific issues, rather than movements in the gold price, appear to be the main cause of the share declines.
An analyst in the article said Newcrest could be a good buying opportunity at current prices if the company is cleared of any wrongdoing. However, there had been no sign of such a clearance at the time of the report, so investors should factor in the ongoing investigations and uncertainty.
Yes. Over the past nine months Newcrest has experienced repeated gold production downgrades, which have already eroded credibility. Observers in the article said the disclosure scandal is exacerbating that existing credibility problem.
Investors should be aware of the unresolved disclosure questions and regulator probes, the recent analyst downgrades and past production downgrades that have hurt credibility. Given those uncertainties — and the fact the company hasn’t been cleared of any wrongdoing in the article — many investors and fund managers may choose to wait for more clarity before buying.
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