Vita Group Limited share price smashed again

Vita Group Limited (ASX:VTG) hints at discussions with Telstra Corporation Ltd (ASX:TLS) as reason for share price fall

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Vita Group Limited (ASX: VTG) has seen its share price smashed again in early trading today, losing 11% to trade at $3.63.

After losing 13% of its value between Friday and Monday when the share price fell from $4.71 to $4.12, the ASX issued the company with a speeding ticket – asking Vita if the company had an explanation for the share price fall.

What was scary for shareholders was Vita's response to the ASX – and the potential reason for the fall today.

Here's what the company said:

"In line with normal commercial practice, on Friday 28th October 2016, Telstra briefed Vita Group and the broader Telstra licensed channel in confidence about some potential changes to the remuneration construct, reflecting a number of market and commercial factors. Vita and Telstra are currently in confidential discussions about those potential changes, and other strategic and tactical opportunities available to their partnership. Once the outcomes arising from these discussions can be reliably assessed, Vita will update the market, if required, in line with its disclosure obligations."

In other words, a confidential discussion has potentially leaked out – and the company has advised the ASX that that is why it thinks the share price has fallen. And it may have had nothing to do with the reasons I suggested yesterday.

Will the corporate watchdog, the Australian Securities and Investments Commission (ASIC), take a closer look?

What is also concerning is that it appears that Telstra Corporation Ltd (ASX: TLS) may have its eye on Vita's profit margins and the telco might want to claw some of that profit back. Telstra and Vita have an agreement where Vita runs just over 100 of Telstra's retail stores, as well as a number of business centres for the telco.

Vita's move to setup a men's lifestyle retail store – SQDAthletic – could be a move to offset lower earnings from its Telstra contract. If that is the case, then management have some explaining to do for not being up front with shareholders.

Investors might want to wait to see what the outcome of the discussions are between Telstra and Vita Group before making a trade.

Motley Fool writer/analyst Mike King owns shares in Vita Group. You can follow Mike on Twitter @TMFKinga The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »