Institutional fund managers often use terms like ‘wild west’ and ‘circus’ to describe the smaller end of the ASX. It’s a corner of the market dominated by retail investors, and where vibes rather than fundamentals often determine share prices.
Today offered up a classic of the genre as shares of DroneShield plummeted by almost 30%, in the space of a couple of hours, wiping more than $500 million from its market value before entering a trading halt.
The reason? Responding to an ASX query, the company pointed to Capital Brief’s reporting this morning that short sellers had begun eyeing the high flying stock. “It's a story stock. There are no fundamentals for why it's trading at these levels. This could end in disaster," fund manager Rodney Forrest from Sublime Funds Management, who is openly short DroneShield, said in the article.
Market sources said the story was widely shared on trading desks. If today’s decline was startling (the stock closed about 23% lower), then DroneShield’s stunning rise up until then was also hard to explain. The stock is up 422% since the start of the year, and as of Monday its market value was hovering just below $2 billion, ranking it above storied names such as Graincorp and Air New Zealand.
