The media simply reports the facts as they see them and having revealed what shareholders were unaware of, people took a closer look at the accounts.
The reason for the price collapse is that shareholders suddenly realised that the fortunes of franchsor and franchisee are inexorably intertwined. A franchisor cannot continue to rely on naive franchisees to part with their savings to support a loss making business that benefits only the franchisor.
Shorters are professionals who generaly have a better idea of the business fundamentals than Mum and Dad investors. It is my opinion that a lack of proper provisioning in the accounts has caused profits to be overstated. If the banks are of a similar opinion they are going to require partial repayment of debt before rolling over loans. This being the case there will be no cash availabe to pay dividends.
Assuming PE ratios and dividend yields based on past figures is like driving a car by looking through the rear vision mirror.
In case you think I am a smart-arse gloating over the misfortune of others, I too was misled by what appeared to be a prosperous growth stock. I managed to limit my losses to about $80K by selling as soon as I revisited the annual report and audit report after reading the media reports.
RFG does have the ability to resuscitate itself, but not by the same management responsible for its current dilema.
RFG Price at posting:
$2.16 Sentiment: Sell Disclosure: Not Held
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