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Mandarin Oriental International Limited’s Shares Plunged 32% This Morning: What Happened?

Luxury hotel operator, Mandarin Oriental International Limited (SGX: M04), saw its stock price plummet more than 30% this morning.

What Caused the Drop?

The decrease in share price came after the company announced in the morning that none of the proposals recently received for the sale of The Excelsior in Hong Kong had fully met its expectations or transaction requirements.

It added that since the proposals are not compelling enough to sell the only four-star hotel in its portfolio, the company is continuing to review all options, including those that may result in redevelopment of the property into a commercial building.

The plans to redevelop the hotel was initially released in June this year when the hotel owner said that it is “undertaking a review of its long-term strategic options” regarding The Excelsior. It also mentioned that “in light of the current strong commercial property valuations in Hong Kong, the Company has decided to test market interest in the possible sale of the property”.

On 15th September 2017, it gave updates that it had received proposals from potential purchasers to acquire the property, and that these proposals would form the basis for further consideration of the company’s strategic options. Following the news, the stock jumped around 20%, from US$2.12 to US$2.56, in a single day.

A Foolish Takeaway

This episode is a classic case of how, to steal Benjamin Graham’s words, the stock market can be a voting machine in the short run.

However, stocks are not mere pieces of paper; they represent ownership in businesses. As such, whenever we buy a stock, we should thoroughly look into the business fundamentals and determine if the company can grow in the future.

Buying the rumour and selling the news is certainly not how we should be growing our wealth.

For more (free!) investing tips and tricks and to keep up to date on the latest financial and stock market news, sign up now for a FREE subscription to The Motley Fool's investing newsletter, Take Stock SingaporeIt will teach you how you can grow your wealth in the years ahead.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.