The Fortescue Ltd (ASX: FMG) share price is down around 9% after the ASX iron ore share suffered a major share sale.
Fortescue is one of the largest iron ore miners in the world, with most of its mining operations currently in Australia. However, it also has global green energy ambitions, as well as an iron project in Gabon, Africa called Belinga.
Huge share sale
According to reporting by the Australian Financial Review, JPMorgan’s equity capital markets team was looking for buyers for $1.9 billion of Fortescue shares at a discounted price after the market had closed yesterday on behalf of an undisclosed institutional investor.
It’s not a good look for Fortescue to be losing a major investor at a discounted price because the market can then decide to price the business (in the short-term) at that lower price.
Another question is – why is that major investor selling out?
Are they concerned about Fortescue’s recent job-cutting announcement? Is the faltering outlook for green hydrogen and other green energy putting a cloud over the business? Was the recent FY24 fourth quarter update disappointing?
It may take some time before we find out the answer, if we ever do.
Falling iron ore price
According to Trading Economics, the iron ore price recently hit its lowest level in a month as “signs of weak demand and the lack of stimulus measures for the property sector in top consumer China weighed on sentiment.” The iron ore price plays an important part in the Fortescue share price.
Trading Economics also said:
Chinese steelmakers have been relying more on offshore markets as local steel demand remains subdued. Meanwhile, data showed that China’s industrial profits grew more than expected in June despite a shaky economic recovery. Moreover, the Chinese government allocated 300 billion yuan in bond funds for economic recovery, although analysts argued that the stimulus package will not be sufficient to boost the property sector.
Fortescue’s profit essentially comes from the iron ore operations, so the iron ore price is key.
Final thoughts on the Fortescue share price
Fortescue shares are down 38% in the last six months, so it’s a lot cheaper now and could be a contrarian opportunity for people that believe that an iron ore price rebound is possible.
However, it depends on what happens on the iron ore price – will it stay lower for longer (or forever)?
There are other ASX dividend shares to consider, where there are less uncertainty.
