Why the Fortescue (ASX:FMG) share price was sold off in September

The Fortescue share price was out of form in October…

| More on:
share price dropping

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 Fortescue Metals Group Limited (ASX: FMG) share price was well and truly out of form in September.

The iron ore producer's shares were the worst performers on the ASX 200 during the month with a decline of 28.8%.

This means the Fortescue share price is now down 40% since the start of 2021.

Why did the Fortescue share price lose 29% of its value in September?

There were a few catalysts for the weakness in the Fortescue share price last month.

Chief among them was the sharp pullback in iron ore prices. This was driven by supply concerns after China curbed steel production and Chinese property giant Evergrande teetered on the edge of defaulting on its huge debts.

And with steel producers having a preference for higher grade ore, there are fears that discounts will widen for the lower grade iron ore that Fortescue produces.

It was partly for this reason that a number of brokers downgraded the company's shares in September, putting additional pressure on its share price.

One of those brokers is Morgan Stanley. It has put an underweight rating and lowly $12.50 price target on the company's shares. This implies further downside of 16.5%.

What else weighed on its shares?

Also weighing heavily on the Fortescue share price last month was its massive final dividend for FY 2021.

On September 6, Fortescue's shares traded ex-dividend for the fully franked $2.11 final dividend.

Based on its share price at the start of the month, this dividend alone accounts for approximately 10% of its decline during September.

All in all, September was a month to forget for Fortescue shareholders. They will no doubt be hoping for better in October. Time will tell if that's the case.

Motley Fool contributor James Mickleboro 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 Bruce Jackson.

More on Share Fallers

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A worried man holds his head and look at his computer.
Share Fallers

Why 29Metals, Brainchip, Platinum, and Premier Investments shares are falling today

These ASX shares are having a tough time on hump day.

Read more »

Man with his head in his head because of falling share price.
Share Fallers

Why 29Metals, Atlas Arteria, IDP Education, and Mineral Resources shares are falling

These ASX shares are having a tough time on Tuesday. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why ALS, EOS, NRW, and Patriot Battery Metals are dropping today

These ASX shares are starting the week in the red.

Read more »

A man looking at his laptop and thinking.
Technology Shares

Why are these ASX tech shares getting smashed today?

Owners of these two stocks are missing out today.

Read more »

a man weraing a suit sits nervously at his laptop computer biting into his clenched hand with nerves, and perhaps fear.
Share Fallers

Why AGL, Brickworks, IGO, and New Hope shares are dropping today

These ASX shares are having a poor session. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Amcor, Arafura, Brainchip, and South32 shares are tumbling today

These ASX shares are having a tough time on hump day. But why?

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Aussie Broadband, Liontown, Metals Acquisition, and Seek shares are falling

These ASX shares are having a poor session. But why?

Read more »