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‘Over-excited’ market sends Aspen to biggest plunge in 20 years

Here’s what traders are saying about the share move.

Aspen Pharmacare shares crashed as much as 26% in the biggest slump since June 1998 after the South African drugmaker sold its infant-formula business for $860 million, less than some traders expected. The company also reported full-year earnings that missed estimates.

Read more about the Aspen-Lactalis deal here.

Here’s what traders are saying about Thursday’s share move:

Investec

“Management seem to think that the market got over-excited about the multiple they were going to get for infant milk,” Investec says in “quick thoughts” note after conference call. 

Management declined to give forecasts for constant-currency profit increase over the next year, saying  analysts should have factored in the negative impact from the South African rand.

Bridge Fund Managers

Market expected bigger sale price for infant milk formula business, money manager Nick Kunze said by phone. “We expected anything from $1 billion to $1.5 billion and even $2 billion, and they sold to the French and not the Chinese”

Vestact

“It’s tougher and more competitive out there, the production problems that are evident in the numbers were a bit of a disappointment,” said Vestact CEO Paul Theron. “Some currency headwinds, a bit of a disappointment.

Maybe the price they got for the sale of the infant nutritional business was a little bit less than some people assumed”. “Investors should be patient — for a company with nearly R50 billion worth of debt, receiving R13 billion is quite a nice chunk of change that gives them headroom to play around with the numbers”. 

© 2018 Bloomberg L.P

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That is what some of the traders say- the price is the summary of the opinions of all the participants. The price-action over time paints an interesting picture. It tells us that the sellers will rule the market until the price reaches support at R100. The majority of buyers will also wait there. Let’s wait and see if the price is telling the truth.

The market is a fickle animal, it can be influenced by brokers, management and barbershop comments.

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