With more than 40 million shares bought and sold since floating on the ASX last Thursday, the Endeavour Group Ltd (ASX: EDV) share price has been quite active.
Listing on the ASX for a price of $6.50, it crashed on its opening day to a low of $5.77 before partially recovering to $6.02. The next day it surged to a high of $6.60 before retreating to $6.10.
Over the next two trading days, its share price closed higher at $6.33 before falling to a close of $6.20 the next.
Watching the drinks company’s share price over the past week could leave an investor feeling like they have a hangover. Let this article be your day-after tonic by bringing a little clarity to what’s happening to Endeavour shares.
Endeavour shares have been volatile
On its first trading day, the Endeavour share price took a beating. Woolworths Group Ltd (ASX: WOW) shares also fell 15% on the same day, a reflection of the fall in value from losing its drinks business. Endeavour was formed from Woolworths’ former drinks business and the AHL Group.
However, a closer examination shows it may not have been as bad a day as it appeared for shareholders in either company.
On the day of the float, eligible Woolworths’ shareholders received 1 share in Endeavour for every Woolworths share they owned. Woolworths and business partner BMG owned the remaining 14.6%.
The Woolworths market capitalisation on 23 June, the day before the demerger, was about $54 billion. At the close of trade on 24 June, the combined market caps of Woolworths and Endeavour was around $58.7 billion.
The initial sell-off may well have been savvy investors looking to cash in on shares that seemed to be valued much higher than the market might have suggested.
Subsequent price movements are likely the result of investors still gaining a better understanding of the Endeavour share price.
It should also be noted that 42% of Australia are in lockdown at the time of writing. This may have benefited the Woolworths share price recently and could be influencing the Endeavour price too.
While Endeavour owns many pubs and clubs, the majority of their business is derived from the Dan Murphy’s and BWS bottle shops which have historically done well during COVID lockdowns.