Ebos, a consistent top 10 stock, fell a further $1.88 or 5.03 per cent to $35.50 on trade worth $28.72m. Its share price has fallen nearly 15 per cent in two days to its lowest level in nearly eight months.
A volatile Pacific Edge traded in a range of 5c and 16c after telling the market it will no longer receive Medicare funding coverage for its Cxbladder tests in the United States – its growth market.
The share price fall was almost equivalent to the amount of revenue it will lose – the Medicare and Medicare Advantage tests, 60 per cent of the US business, generated $15.3m or 77.3 per cent of Pacific Edge’s total operating revenue for the year ending March.
Pacific Edge told the market it will explore all available legal options, including an appeal, and it will bill and receive reimbursement from other contracted US payers.
Jeremy Sullivan, investment adviser with Hamilton Hindin Greene, said Pacific Edge’s growth strategy was focused on the US and the decision by Medicare’s contractor Novitas is a major blow – if not a threat to its whole business model.
“No doubt, Pacific Edge will pull out all stops to have the decision overturned. To see Pacific Edge’s market capitalisation reduced from $400m to less than $100m in one day is not a normal occurrence on our market. It goes back to the pre-continuous disclosure obligations to see such volatility with a company announcement,” Sullivan said.
“It’s been an interesting couple of days of corporate action. It goes to show the benefits of having a diversified portfolio and not having large exposures to single contracts. You’ve seen [with Ebos and Pacific Edge] what can happen very quickly.”
The corporate action was even hotter when utilities investor Infratil went into a trading halt ‘til Friday morning after launching an $850m equity raise at $9.20 per share. The money will help fund the purchase of the remaining 49.95 per cent shareholding in One New Zealand (formerly Vodafone) for $1.8 billion. Infratil last traded at $10.10.
Infratil, which already owns 49.95 per cent of One NZ, is buying the holding from Brookfield Asset Management with a mixture of cash, debt and the equity raise involving an institutional placement worth $750m and a pro-rata retail offer of $100m to shareholders.
The acquisition values One NZ (with 2.7 million mobile connections and 98 per cent national coverage) at $5.9b, and Infratil will finish up with 18.7 per cent debt gearing and available liquidity of $927.7m.
Sullivan said with full control, Infratil can run their own timetable on when to exit One NZ. “You might see a sale over the next five years – just like they did with Z Energy (service stations).”
Global marketer a2 Milk gave back nearly all the gains the day before, falling 24c or 3.97 per cent to $5.80. Synlait Milk was down 11c or 5.88 per cent to $1.76 after gaining re-registration for a2 Milk’s China label infant formula.
Sullivan said the average trade in a2 Milk’s shares was $2200, so it looked like retail investors were waiting for the announcement and then deciding to sell.
Fisher and Paykel Healthcare was up 14c to $23.95; Tourism Holdings rebounded 13c or 3.77 per cent to $3.58; Arvida Group added 3.4c or 2.92 per cent to $1.20; Eroad increased 3c or 3.66 per cent to 85c; NZME rose 4c or 4.17 per cent to $1; and AFT Pharmaceuticals gained 7c or 1.83 per cent to $3.90.
In the property sector, Stride was up 5c or 3.82 per cent to $1.36, and Property for Industry gained 4c to $1.73.
Mercury Energy was down 18.5c or 2.75 per cent to $6.535; Auckland International Airport decreased 13.5c to $8.585; Sanford retreated 11c or 2.58 per cent to $4.17; Freightways declined 10c to $87.75; and Mainfreight shed $1.05 to $69.
Warehouse Group was down 8c or 4.68 per cent to $1.63; Rakon shed 4c or 4.08 per cent to 94c; TradeWindow fell 3c or 8.57 per cent to 32c; and NZ Automotive Investments declined 1.5c or 4.92 per cent to 29c.
