Tuesday, August 28, 2007

Burger Fuel Director explains Share Price drop

Josef Roberts, a Director of Burger Fuel (BFW) has kindly answered a question that many of you out there would like to ask him.

I put this to him in an email today:

Do you have any comments with regards to the dropping share price and your initial valuation of the IPO?

Josef replied:

Not really – as you know at present there is nervousness in world markets and general tightening of the economy, but in our case it’s mainly due to a situation of low stock liquidity; so just a few small trades can cause the stock to drop if someone needs cash or wants to accept a lower offer. The actual trades are very low.

I don't share Josef's opinion as to the share price drop. I would agree with him that liquidity would affect the share price somewhat but if the market had an overwhelming positive feeling over Burger Fuel's IPO valuation then the low stock liquidity would have presumably shot the share price well above the NZ$1 IPO price as the reality of the market negativity over Burger Fuel's market cap has seen the share price dip to 65c as of today.

c Share Investor 2007