SYDNEY — Trading of Billabong shares was suspended Thursday after they plunged as much as 22 percent in the morning session.
Volumes were unusually high, with over 9 million shares changing hands. The price had recovered slightly to 69.5 Australian cents ($0.72 at current exchange), down 14.2 percent, by the time trading was halted shortly past noon.
According to a statement from the Australian securities exchange, a trading halt was requested until Monday, or the release of an announcement by Billabong, pending “an investigation by the company into trading levels today”.
Billabong’s shares closed at 81 Australian cents (or $0.84 at current exchange) on Wednesday, down 3.6 percent.
Last month, when Billabong reported a first-half record loss of 537 million Australian dollars, or $550.19 million at February exchange rates, the company predicted that the due diligence process currently being conducted by two private equity suitors — the Altamont/VF Corp and Naudé/Sycamore consortia, both offering 1.10 Australian dollars per share ($1.14) — would be concluded by the end of March.
With both TPG Capital and Bain Capital withdrawing their takeover offers last year after the commencement of due diligence, analysts remain divided about the new bid prospects.
On Wednesday, Credit Suisse analyst Grant Saligari published a note reinstating a 1.10 Australian dollar per share price target on the stock, due to the likelihood of a takeover from “one or more” of the two private equity proposals.
“Bids are due in a week — there is some risk that they disappear altogether or fall below A$1.10,” noted another analyst, who did not wish to be named, adding that “no one knows” what prompted Thursday’s trading frenzy.
According to Michael McCarthy, chief market strategist at CMC Markets, market speculation was rife earlier in the morning that Billabong was about to make an announcement.
Said McCarthy, “The problem is that the previous four bids all fell over at the due diligence stage and [although] there was market optimism about the two new suitors, with the announcement that it’s been put into a halt people are nervous again. This company is facing a binary future: it will either reinvent itself using its current strengths such as its distribution network — or it’s going broke.”
In a second statement released after the stock exchange had closed, Billabong confirmed that the company remains in talks with both consortia and reiterated that it was not aware of the reasons for the increased level of trading, but referenced “an article in today’s The Australian Financial Review referring to the bid process for the Company and to a Credit Suisse research analyst report in relation to the Company.” The story had quoted Credit Suisse’s worst case scenario of Billabong’s equity value being reduced to zero by the 2015 financial year if earnings fell from the current guidance of 74millionAustralian dollars ($76.8million) for fiscal 2013 to 50million Australian dollars ($52million) in 2015.
Billabong’s shares were expected to resume trading on Friday morning.