The extent to which Canadian transportation manufacturer Bombardier, Inc. (TSX:BBD.B) has sold off in recent months has been quite dramatic.
Those on the bearish end of the spectrum (myself included) have been surprised both at the share price increase of Bombardier since early 2017, and this most recent rapid decline in the company’s share price.
I have followed Bombardier for quite a while, and through scandal and competitive pressure, Bombardier’s management team has seemingly found a way to avoid calamity, in part by relying on strong relations with the Quebec and Federal governments.
This past week’s significant drop has culminated as a result of regulators announcing they would be looking into Bombardier’s executive stock-sale program. Quebec’s Autorite des Marches Financiers has begun an investigation into the current program, halting trading of shares related to this program until further notice.
The big news here isn’t that a stock-sale program was put in place by Bombardier executives; rather, the issue lies in the messaging such a program sends to the market.
If corporate executives in any company argue adamantly on one hand that said company is on a path to growth and will rebound, but on the other hand are selling a significant chunk of stock, investors ought to be concerned with just how much faith these leaders have in such a turnaround.
Bombardier’s management team doesn’t have its money where its mouth is, and investors have begun to take notice. Regulatory scrutiny at this stage in the game for Bombardier could be a significant headwind for the company, meaning additional bailouts may be required in the near term to fund operations which don’t appear to be able to support the company’s very high debt load.
Invest wisely, my friends.
