Billion-dollar mining giant Rio Tinto Ltd [ASX:RIO] fell more than 3%, to $61.51, in mid-afternoon trade. The fall pushed Rio’s market cap below $100 billion, to $99.92 billion.
Why did the RIO share price drop?
Last year, Rio was involved in a scandal that cost the company US$10.5 million. This kind of cash is chump change to Rio. Allegedly, the US$10.5 million was used to smooth over Rio’s relationship with individuals involved in the company’s Guinean operations.
According to reports, Rio Tinto and former CEO, Sam Walsh have agreed to the deferment of bonus payments until investigations into the scandal have advanced further.
What now for Rio Tinto?
This news isn’t likely to ruin the big miner, of course. They’ll still keep humming along, and the stock will correct in time. But Rio’s decision should remind you that unexpected events can have an impact on the success and stability of any business.
So, the next time you find a potential investment, try to think of things that can and could go wrong.
You’ll never cover every possibility, but the more research you do on a company, the better.
Correction and apology: An earlier version of this article implied that Mr Walsh may have known about the alleged bribery scandal at the time. Our understanding now is that there have been no findings, and that investigations are still ongoing. We apologise for the inaccuracy.