If a stock dives 55 percent, is it time to go bargain hunting?
Absolutely not! At least that was the case with India’s Satyam Computer Services after it shocked investors on Wednesday by disclosing most of its profits were cooked up.
The disclosure came after the company’s botched attempt last month to buy two construction firms partly owned by its founders, which sent its shares diving 55 percent in one session by angry investors.
Chairman Ramalinga Raju said: “It was like riding a tiger, not knowing how to get off without being eaten.”
The shares tumbled nearly 80 percent, roiling investor confidence in India and bringing an undignified end to the illustrious career of one of the country’s top businessmen.
The accounting fraud which analysts instantly dubbed as “India’s Enron”, battered confidence in Indian companies and cast a shadow on the once-booming outsourcing industry.