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Friday, 16 December 2016

"Please explain" for Sirtex (shemozzle)

Please explain

Further unhappy news for Sirtex Medical (ASX: SRX) shareholders as the ASX slaps the company with a "please explain" letter, "following a tip-off" to the ASX.

Listings Compliance also unsurprisingly didn't like the use of "imprecise terms", such as "double digit growth".

Company Secretaries and CFOs live in abject fear of letters like this, and it's never cool to get on the wrong side of compliance offers.

Sirtex explained in its reply that its futures sales are inherently unpredictable with "no transparency on dose sales" and a "very short sales cycle".

This may arguably be a sound explanation to the points raised by ASX Listing Compliance, but then again it's also hardly likely to inspire confidence in prospective shareholders.

The share price not surprisingly got trashed (again). 

The 52-week high of above $41 looks a way off now following today's close at $16.40 (I can remember when Wilson's had some huge price target's on this stock!). 

Despite the illusory comfort provided by continuous disclosure rules, this is another of the pitfalls of investing or speculating in individual companies.

The narrative fallacy allows investors to convince themselves that they understand highly specialised industries that in reality they have no experience in, and opaque reporting or inexact forecasts can lead to materially inaccurate calculations of a company's intrinsic value.

Last week it transpired that Goldman Sachs had sold done a big chunk of its substantial shareholding.

The CEO himself had dumped $2 million of stock only five weeks ago, which should probably have been a big sell signal.

In related news, Bellamy's (ASX: BAL) also saw its share price annihilated from a high of $15.73 to $6.68, and has now been suspended from official quotation. Bellamy's key execs (CEO and Chair) were also dumping shares at $14 in August. What a joke!



Just saw this epic spray from Motley Fool, which lists a dozen red flags and says that SRX has no credibility, and "only the gullible or misguided" would buy shares.

That's a big turnaround from the multi-billion dollar opportunity a fortnight ago.

I guess Tom R was a shareholder (in both companies) from the wildly emotive reaction!