Profiting from scandal - the Lark disaster

This week was quite interesting, and I did something that I have never done before. I profited from a scandal.

Lark Distilling is a Tasmanian distillery who make what is meant to be quite a mean whiskey. The CEO is well liked and had grown the company to an impressive standard.

However, this week images were released to the media showing the CEO smoking something in a glass pipe.

According to this article, the CEO was extorted for money after a group of people he had just met took him partying (which resulted in some drunken drug use) in the US. The CEO subsequently stepped down upon the release of the images.

What I found interesting about this news being released (allegedly by the extortionists), was that there was massive panic selling of Lark shares. The share price dipped during the day by as much as 23%.

After seeing this, I briefly looked at the company. The fundamentals of the company are good, and haven’t changed despite the company needing a new CEO.

I decided that the overselling presented a good opportunity:

• I could buy some cheap shares to hold for the long term.
• Or I could buy some heavily discounted shares, wait for a brief recovery, and sell for a small profit.

This was all happening on a work day, so rather than spending time researching and planning out a trade, I did something a little risky: I bought some shares at $3.70 and put in an immediate sell order for $3.95. And, by luck more than anything, by the market close my shares sold.

What’s even more interesting about this trade, is that I didn’t even have money to trade with. I used a margin loan for this trade. So as it turns out, I made a quick few hundred dollars with money that wasn’t mine and all in a single day.

It’s a nice win, but I’m not about to pretend that it wasn’t anything but luck. I’ll take it though.

@mazzle

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