Up 175% in a year, is this why the Sigma share price is falling this week?

Sigma shares are taking a tumble again today. But why?

| More on:
Lines of codes and graphs in the background with woman looking at laptop trying to understand the data.

Image source: Getty Images

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

The Sigma Healthcare Ltd (ASX: SIG) share price is deep in the red today.

Shares in the S&P/ASX 200 Index (ASX: XJO) healthcare stock – which owns chemists including Amcal, Discount Drug Stores, and Guardian Pharmacy – closed down 2.5% yesterday at $2.78. In afternoon trade on Wednesday, shares are swapping hands for $2.63 apiece, down another 5.58%.

But don't break out your tiny violin for long-term shareholders just yet.

As you can see on the chart above, the Sigma share price remains up an impressive 175% over 12 months.

Go back just a little further, to 11 December 2023, and the ASX 200 healthcare stock is up a blistering 256%. Or enough to turn a $5,000 investment into $17,800.

What's going on with the Sigma share price?

As you're likely aware, the Sigma share price has received ongoing support since the company announced its $30 billion merger intentions with privately owned Chemist Warehouse on 11 December 2023.

Since that announcement, the mega-merger has proceeded more or less on track. In November, Sigma shareholders learned that the Australian Competition & Consumer Commission (ACCC) had approved the deal.

Next week, on 29 January, shareholders will vote on the deal, which has been unanimously recommended by the Sigma board. Should that pass as expected, the transaction should be completed by 12 February.

So, with everything appearing to be proceeding to plan, why is the Sigma share price down 7.2% this week?

Well, that could be driven by news that some of Chemist Warehouse's biggest stakeholders may be preparing to sell down their shares in the newly merged entity.

Chemist Warehouse franchisees looking to cash in

Citing unnamed sources, The Australian Financial Review reported earlier this week that the owners of some of Chemist Warehouse's largest franchisees have been in discussions with a number of Equity Capital Markets (ECM) teams about selling shares.

This could be throwing up headwinds for the Sigma share price, with those sources noting the franchisees hold a combined $900 million to $1.1 billion worth of stock from their historic holdings of unlisted Chemist Warehouse shares.

Upon listing, the newly merged ASX 200 healthcare behemoth represents the first chance many of these investors will have had to cash those shares in for a tidy profit.

Now, the Sigma share price is likely getting spared a heavier retrace, with analysts expecting a lot of interest from active investors, as well as a wave of passive money from index tracking funds, to buy into the merged company.

But the ECM teams cited by the AFR expect that the amount of passive money looking to buy will be significantly less than the value of the shares Chemist Warehouse franchisees may be looking to sell.

According to the ACCC, following completion of the deal, Chemist Warehouse shareholders will hold 85.75% of the ASX listed merged entity while Sigma shareholders will hold 14.25%.

Motley Fool contributor Bernd Struben 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 Scott Phillips.

More on Healthcare Shares

Three Archer Materials scientists wearing white coats and blue gloves dance together in their lab after making a discovery
Healthcare Shares

Why is the Sigma share price soaring 6%?

Sigma has upgraded its FY25 guidance ahead of the anticipated Chemist Warehouse merger completion.

Read more »

Stethoscope with a piggy bank and hundred dollar notes.
Healthcare Shares

Which ASX 200 healthcare share will pay the best dividend yield in 2025?

Earnings season is underway and dividend announcements are on investors' minds.

Read more »

A person is weighed down by a huge stack of coins, they have received a big dividend payout.
Dividend Investing

Looking to bag the record high ResMed dividend? You better hurry!

Unlike the majority of ASX 200 income stocks, ResMed pays dividends every quarter.

Read more »

Two lab workers fist pump each other.
Healthcare Shares

3 reasons to buy CSL shares today

Two investment experts expect a big turnaround for CSL shares in 2025.

Read more »

Business people discussing project on digital tablet.
Healthcare Shares

Down 4%, is the ResMed share price in the buy zone?

Do analysts think investors should be buying the dip? Let's see what they are saying.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Healthcare Shares

Guess which ASX 100 share is sinking 8% because of Trump's tariffs

Donald Trump has dealt this company a big blow. What's happening?

Read more »

Two scientists in a Rhythm Biosciences lab cheer while looking at results on a computer.
Healthcare Shares

Up 1,090% in a year, why is the Mesoblast share price leaping higher again on Friday?

Mesoblast shares have surged more than 1,000% over the last 12 months.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Earnings Results

ResMed shares rise on strong Q2 result

Let's see how this sleep treatment company performed during the second quarter.

Read more »