What a week it has been for the Magellan Financial Group Ltd (ASX: MFG) share price. Magellan shares had one of the worst weeks in the company's history this week.
The Magellan share price fell an astonishing 32.9% between last Friday's close and Monday's open. It found a new 52-week low of $19.19 earlier this week. That was the first time Magellan has fallen below $20 a share since 2015.
But the past few days have certainly seen a reversal of fortunes for this ASX 200 fund manager. Today, the Magellan share price is $21.40 at the time of writing, up a healthy 2.1% so far. This means that Magellan shares have now bounced by 11.5% from their new 52-week low that we saw earlier in the week.
So to understand Magellan's rather decisive recovery, we first have to go over what caused the Magellan share price to tumble so tragically on Monday.
Top ASX 200 fund manager faces its worst Christmas
So before this week, Magellan was already a company under pressure. The sudden and scantily-explained exit of its CEO Brett Cairns on 6 December spooked investors first.
Two days later came the announcement that the marriage of Magellan's founder and chief investment officer, Hamish Douglass, had broken down. Douglass and his wife, Alexandra, both own significant chunks of Magellan shares, so the split had investors worried that a large-scale sale of shares might be on the cards.
Then last Friday, Magellan got some even worse news. As we covered at the time, the Magellan share price was suspended from trading last Friday after the company announced that a "material contract" had been terminated.
On Monday, it was revealed that the client contract in question was that of British wealth management company, St. James's Place (LON: STJ). The contract was worth around 12% of Magellan's annual revenue, so this was obviously big news for ASX investors to digest.
The resumption of trading on Monday saw the nasty share price crash we touched on earlier.
So with all of this seemingly bad news coming Magellan's way, what has turned the ship around over the past 3 days?
Why has the Magellan share price bounced back?
Well, it could be put down to 1 or 2 factors. Firstly, Hamish Douglass released a client video yesterday that addressed many investors' concerns.
Douglass said any suggestion that he or his wife would "dump" shares in Magellan was "absurd". He added: "We've never sold a single share in Magellan".
He also stated that "people have tried to create an image that my wife and I are in some nasty divorce … Nothing could be further from the truth".
He urged calm among investors regarding the St. James's Place mandate.
Douglass said:
Their decision to withdraw doesn't have an impact on any other clients and importantly, it doesn't have that larger impact on our business.
So it's possible that Douglass's strong defence has eased some concerns over the company's future direction.
It's also possible that some investors are seeing great value in a Magellan share price under $20.
Whatever the reason for Magellan's share price recovery, investors will surely feel relieved. Merry Christmas, indeed!
