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Yesterday’s ASX session was a fairly muted one for investors. Tuesday saw the All Ordinaries (ASX: XAO) Index lose 0.23% of its value to finish at 8,243.3 points. But it was a far more dramatic day for DroneShield Ltd (ASX: DRO) stock.
Droneshield shares started the day by printing yet another new record high of $2.72 a share. But that was in the first minutes of trading, and it was all downhill from there. By mid-afternoon, the company had seemingly inexplicably lost more than 30% of its value. Droneshield even got down to $1.79 a share at one point.
The stock was suspended from trading for a couple of hours but returned to trading about an hour before the closing bell. When said bell rang, the company closed at $2.02 a share, down a horrid 22.31% for the day.
As we covered at the time, it was initially hard to see what was going on with Droneshield stock. There wasn’t any news or announcements from the company we could point to.
So it was speculated this was just a severe case of everyone trying to take their money off the table at once.
After all, this was a stock that was up by more than 615% year to date at one point yesterday. The company was also up almost 80% over just the preceding month.
But now that the dust has settled somewhat, we have a clearer picture of what went on during Tuesday’s trading session.
What on earth happened to DroneShield stock on Tuesday?
Naturally, after yesterday’s unexpected stock price plunge, Droneshield was sent a ‘please explain’ share price query by the ASX after its shares were temporarily halted from trading.
When asked to give its best explanation for what went on yesterday afternoon, Droneshield pointed the finger at an article that was released, discussing its shares. This article, the company asserted, included the following:
Share price performance over the recent period;
Comparison of DRO’s market cap to several large companies across different industries in the Australian market;
Statements by two fund managers on their opinion of DRO’s valuation being overheated;
Statements from two stock analysts on their outlook for DRO;
Brief summary of DRO’s business;
Reference to DRO being a popularly traded stock on several broker platforms; and
A historical sale of DRO’s shares held by one of DRO’s Directors’, Jethro Marks.
The company also told investors that “There is no new information or change of circumstance around the business”. It also affirmed it was complying with all ASX listing rules.
What’s next?
Given the rather unusual and unexpected nature of yesterday’s events, we’ll only know how investors will react when the market opens today. It’s arguably possible that we’ll see a big rise upward for Droneshield stock. But then again, it’s equally possible that there will be another sell-off, or not much movement at all.
It is worth noting that Droneshield shares were still being heavily sold when they returned to trading yesterday afternoon after the company had made its case. But it’s unclear how investors will react today after everyone has had a breather. We’ll soon find out.