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Why Shares In Afren Plc Plunged This Morning

Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

oil rigWhat: Shares in Afren (LSE: AFR) plummeted by over 32% in early trade, following the announcement that the CEO and COO have been temporarily suspended by the board.

So what: An independent review, commissioned by the board and undertaken by Willkie Farr & Gallagher, found evidence of the receipt of unauthorised payments “potentially for the benefit of the CEO and COO”, Osman Shahenshah and Shahid Ullah, respectively.

Afren’s half-year results, which were due on 4 August, will now be postponed to no later than the end of August. Management stated that they have “no reason to believe that this will negatively affect the company’s stated financial and operational position”, but this news rocked the market’s faith in the shares this morning nonetheless.

Now what: Senior independent director Toby Hayward has stepped in as interim CEO while the investigation continues, while Egbert Imomoh has agreed to become executive chairman. It could be argued that the share price had speculation over a takeover baked in to it — though it had only risen by 5.7% over the last 12 months prior to today’s sharp decline — yet it’s hard to see anyone swooping in while this cloud hangs over the company.

Whether you think Afren can recover from this setback is down to you. But if you're looking for a growth share with excellent prospects, then you really need to read our latest special FREE report, "The Motley Fool's Top Growth Share For 2014".

Top analyst Maynard Paton believes that this company could be set for double-digit returns in the next five years -- so what are you waiting for? Click here now to read up on this small cap while it's still undervalued by the market!

Sam Robson has no position in any shares mentioned. The Motley Fool recommends Afren.