Freeport-McMoRan Gets Out The Ax - Forbes.com: "
The Phoenix-based mining company said Tuesday it was suspending its dividend, scaling back production and slashing its 2009 capital expenditures plans...Shares of Freeport
tumbled 17.3%, or $3.77, to close Wednesday's trading session at $18.05"
A few comments:
1. Dividend cuts convey additional information about the future (signaling)
2. Capital Expenditures cuts are also generally seen as bad news and a bad sign for future.
3. That commodity prices had fallen was not news, so it does not explain why price of stock fell.
The first two points are included in the tables from Smith and Masulis that we use in class regularly.
BTW As an aside, the SBU Student Managed Investment Fund currently does own Freeport-McMoran. Oops!