Why is the Codan (ASX:CDA) share price free-falling 13% today?

Invstors are dumping the Codan’s shares after the communications company announced a new contract.

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The Codan Limited (ASX: CDA) share price is slumping during afternoon trade after spending most of the morning in the green. This comes after the technology company announced to investors that it has secured a significant contract.

At the time of writing, Codan shares are swapping hands for $11.62, down a sizeable 13.8%. This means that its shares have swung 18% today.

Let’s take a closer look at what the company announced to the ASX at market open.

Codan succeeds in new military contract

Investors are sending Codan shares lower despite the company delivering a seemingly positive announcement to the ASX.

In its announcement, Codan advised its wholly-owned subsidiary DTC Communications has secured a significant contract with a global technology corporation.

The multi-year deal will see DTC supply its communications equipment to a sensitive military program. Its mesh technology enables short-range, high bandwidth communications for wireless transmission of video and other data applications.

The initial purchase order for the DTC products will be delivered in the next 12 months. Valued at US$28.2 million ($37.6 million), 60% of the equipment is expected to be sent sometime during FY22.

Codan noted the contract is strategically important and will help grow its business in the communications solutions market.

The purchase order and agreement are subject to the customary termination conditions.

What does Codan do?

Founded in 1959, Codan designs and manufactures a range of electronic products and software for governments, businesses, aid and humanitarian, and customer markets.

The company uses radio wave technology for communications solutions, including powering metal detectors to find gold, visualising complete mine operations underground, and powering defence electronics.

Codan share price summary

It’s been a sound 12 months for Codan investors with the company’s shares rising by almost 20% — until today. The hit to Codan’s share price this afternoon has scaled back its 12-month gains to 3.51%.

Year-to-date, its shares have fared a little better at 5.37%.

The company’s shares are now hovering towards the bottom end of their 52-week range between $9.20 and $19.43.

Based on today’s price, Codan commands a market capitalisation of roughly $2.1 billion and has approximately 180.8 million shares outstanding.

Should you invest $1,000 in Codan right now?

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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