Here’s why Spotless Group Holdings Ltd’s share price soared today

Shares of cleaning and catering services business Spotless Group Holdings Ltd (ASX: SPO) soared 15.3% on Wednesday on lower trading volumes than each of the last three sessions. It was the best performing share on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) for the day.

Spotless Group’s shares have come under severe selling pressure in recent weeks, sparked by a major earnings downgrade at the beginning of December. After trading for $2.20 around that time, the shares quickly fell to a low of just 90.5 cents as investors scrambled for the exits, which even led to speculation regarding potential interest from an offshore private equity firm.

Of course, if it were to be taken over, now could be the opportune time. Its shares haven’t traded this low before and the weak Australian dollar would make a purchase by a foreign investor even cheaper.

Making things even worse for Spotless Group were reports from The Sydney Morning Herald that the company had lost a three-decade-old catering contract at Brisbane’s Suncorp Stadium to a smaller rival recently.

While reports of a potential takeover have likely helped prop up the shares somewhat since then, a notice to the market today noted that one of the company’s directors, Martin Sheppard, had acquired 50,000 more shares in the business.

There are numerous reasons why directors may want to sell shares – for example, believing they’re overpriced or simply needing to liquidate to pay for a new house (etc) – but there is only one reason why they’d want to buy. Shepperd’s recent acquisition may have provided the boost in confidence needed by regular investors to buy as well.

Some of the market’s other top performing shares for the day were Beach Energy Ltd (ASX: BPT), Alumina Limited (ASX: AWC), and Drillsearch Energy Limited (ASX: DLS), all of which rose between 10.5% and 13%.


Motley Fool Pro is now open to new members Our most comprehensive and innovative ASX investment service -- has reopened for a brief time, to accept new members. That means you've got the chance to follow along as one top investor puts $1,000,000 of The Motley Fool's own money to work...all in ASX stocks. But to get YOUR front-row seat, you must act NOW. (Please note: just 1,000 new member seats are available.) Click here to claim YOUR invite!

Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.