Please ensure Javascript is enabled for purposes of website accessibility

Why Qunar Cayman Islands, Ltd. Stock Dropped (Again) Today

By Steve Symington - Jan 7, 2016 at 3:50PM

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 Chinese online travel specialist continued its plunge with the broader market, but also now faces shareholder lawsuits. Here's what investors need to know.

What: After falling more than 16% to start this week after the company revealed significant management changes, shares of Qunar Cayman Islands, Ltd. (QUNR) dropped another 11% Thursday, as the broader Chinese stock market continued its precipitous decline. Qunar is also now facing a number of shareholder lawsuits related to its management turnover and recent decline.

So what: Similar to Qunar's plunge on Monday, The Shanghai Stock Exchange Composite Index fell another 7% today, while the Shenzhen Composite Index declined more than 8%. Once again, the decline triggered so-called circuit breakers instituted by Chinese authorities to suspend trading and limit losses. China's central bank responded Thursday by announcing it would inject another $10.6 billion into the financial system.

Meanwhile, U.S.-traded Chinese stocks continued to plunge, especially as the moves indicated concern over the continued slowing of growth for China's economy. Qunar wasn't alone today: Shares of (TCOM -0.09%) declined more than 5% today, and Chinese web giant Baidu (BIDU 0.58%) dropped more than 6%. For perspective, in October, Ctrip completed a share swap with Baidu in exchange for shares worth roughly 45% of Qunar's voting interest, then announced a long-term collaboration with Qunar to strengthen the online Chinese travel industry.

In the wake of that collaboration, Qunar also surprised investors Monday by announcing the appointment of a new CEO, a new chief operating officer, and a new chief financial officer. The departing management seemed to be doing so on good terms -- both its former CEO and CFO are sticking around as senior advisors for another quarter -- and the moves followed previous significant changes to Qunar's structure and board of directors.

Now what: Perhaps predictably, however, at least two law firms stepped out today announcing shareholder suits against Qunar, blaming the recent share-price declines on the abrupt management turnover, and commencing investigations as to whether the company violated federal securities laws in the process.

Whether these suits ultimately turn out to have merit remains to be seen, but I'll reiterate that it appears China's broader-market declines are the single-largest culprit here. While I'm personally content watching Qunar's progress from the sidelines, I think investors would still be wise to continue focusing on the fundamentals driving its business.

Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Baidu. The Motley Fool recommends International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Baidu, Inc. Stock Quote
Baidu, Inc.
$138.62 (0.58%) $0.80 Group Limited Stock Quote Group Limited
$26.50 (-0.09%) $0.03
Qunar Cayman Islands Limited Stock Quote
Qunar Cayman Islands Limited

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/08/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.