Shares in surfwear retailer Billabong were wiped out on Thursday. It's a lousy pun but a pretty accurate description. The stock fell 20 per cent when trading opened, the company called a trading halt and the market ran riot with rumours the two potential suitors had walked away from making an offer for the battered company.
The unusual turn of events sent the company scurrying to the ASX to request a trading halt while it attempted to investigate what had pushed the shares into free fall.
Strange as it may sound, both the parties doing due diligence on Billabong were still in the data room investigating the numbers under Billabong's bonnet when the shares fell. However, it is understood the $1.10 offer price that had been touted by the two private equity groups has been revised to about 80¢.
One of the groups, Sycamore, is understood to be in the US looking over Billabong's operations.
This doesn't mean either or both interested parties won't drop out over the next week when the bids are due but it does suggest that at this point both are still in the game.
If the company can get to the bottom of what was behind the price fall (on heavy volumes) it will reinstate trading.
But if Billabong is aware that either group has walked away, there will be plenty of questions asked about its disclosure.
Meanwhile, there were no major lines of stock being traded - instead it seemed to be driven by numerous speculators.
It is understandable that the market has the jitters about Billabong's appeal as a takeover target.
Already several private equity groups have approached the company and trawled through the numbers, only to walk away.
Their reluctance to sign on the dotted line is also understandable, because Billabong has been a chronic underperformer and notched up more profit downgrades over the past 18 months than almost any other ASX-listed company.
Based on potential offers now being 80¢, and factoring in the chance that neither may eventuate, a 69.5¢ price for Billabong is probably about right.
This is where it was when the trading halt took effect.
In theory, the company was under no obligation to halt trading under the disclosure laws; it was more a case of lawyers playing cautious. But if it transpires that one or both of the bidders have pulled out, the Australian Securities and Investments Commission will be taking a very hard look at the trades that took place on Thursday morning, with a close eye on any short positions.
Some of it could be a response to a report on Billabong by investment bank Credit Suisse on Wednesday, which concluded the worst-case scenario if a bid did not emerge was that the company's equity was worth nothing.
While this would be enough to spook any investor, the reaction should have hit on the release of the report, rather than a day later.
The report points to the history of declining wholesale sales and profits driven by external and internal factors and "several problem assets and legacy issues which are likely to be costly for Billabong to deal with".
While some of Billabong's problems are due to external factors such as the consumer spending strike in most parts of the world, the company has fared far worse due to its poor strategy and management over a number of years.
The financial result produced by Solomon Lew's Just Group provides a stark contrast to Billabong.
This company is already two years into a strategy to deal with a structurally challenged retail industry.
There is a limit to what any retailer can do about limp consumer sentiment but Just - owned by Premier Investments and run by former David Jones boss Mark McInnes - seems to have ticked a lot of the boxes.
The company has taken a lot of cost out of the business. It is essentially a private-label operation that includes design and manufacturing out of various Asian locations.
Retail profit improved by almost 10 per cent in the first half of financial year 2013 and sales were up 2.5 per cent.
Like most other retailers, Just Group has managed to improve gross margin - in part by cutting back on discounting and through being more hard-nosed in sourcing product.