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Shares of the Taiwan Semiconductor Manufacturing Company (TSMC) slumped last in Taiwan and in the U.S. after its chief executive officer, Dr. C.C. Wei shared a video with employees that encouraged workers to take vacations. The stock then recovered soon afterward but closed down lower as the media criticized the executive's message. However, analysts called the media's reaction a bit too much, yet stressed that in the current tough environment that the world's largest company is operating in, messaging to shareholders needs to be concise and address their concerns.
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Like other semiconductor firms, TSMC too saw its fortunes tumble this year as an economic slowdown ushered in the wake of inflation hit consumer purchasing power and ended up eroding technology companies' revenues. Companies such as Intel, AMD and NVIDIA saw their revenues shrink, and TSMC was forced to delay some of its capital expenditures for this year to next year as it dealt with low capacity utilization and delayed deliveries for its chip manufacturing equipment.
In the midst of all this, TSMC's CEO Dr. C.C. Wei shared a video that recommended employees take vacations to recharge themselves. This video was shared on the 25th of this month, and in it the executive thanked employees for their performance, asking them to also keep in mind their annual vacations as his company heads towards closing the fourth quarter of a tumultuous year.
The message, which came after Dr. Wei had also sold a significant portion of his holdings, caused panic among investors and caused TSMC's American Depository Receipts (ADRs) traded on the New York Stock Exchange (NYSE) and its shares traded in Taiwan to touch dangerously low levels. The ADRs dropped to $60 per share at one point, a couple of cents shy of their 52-week low levels, and the shares also went as low as NT$370.50.
The price drops were also caused by foreign investors short selling the shares according to a report from the United Daily News (UDN). According to UDN, 17,000 TSMC shares were sold on the market on the 25th in Taiwan, when TSMC's share price dropped and the percentage of shares held by foreign investors also dropped to 71% during the same time period. This also caused the regulatory bodies to place a lock on selling the shares as the price dropped by more than 3.5%.
What had further spooked the market was the fact that Dr. Wei's message came after he sold - or pledged - 27% of his shares, with investors worrying that the sale came as the share price would drop further due to disappointing performance. Insider sales, such as those of Dr. Wei's are often heavily scrutinized, and executives buying more shares signals confidence in the firm while a sale does the opposite. Analysts, on the hand, suggested that Dr. Wei had used the shares to take out a loan - a common practice among high-net-worth individuals.
TSMC also clarified later on that in his video the executive was simply hoping that his colleagues would spend more time with their families, and the remarks were in no way indicative of the executive's thoughts on the company's performance and neither was he asking them to take unpaid leaves.
Commenting on the entire affair, Lu Xingzhi, an analyst shared that he thinks that TSMC management should focus on assuaging shareholder concerns about the current environment and that the two events taken together could have been avoided.
TSMC's ADRs are now back at the levels before the sell-off, and the firm is focused on mass-producing semiconductors manufactured on the 3-nanometer process node.