Blinkx (LSE: BLNX) has the usual characteristics displayed by the hottest of AIM stocks a great story, the potential for lottery-like winnings, and a large herd of excited private investors posting on financial bulletin boards.
Blinkx was spun out of Autonomy and floated on AIM in 2007. The flotation included a placing at 45p a share. The shares reached a high of 230p towards the end of last year, but have been falling since; the price is 30p at the time of writing. Is Blinkx a story stock gone sour?
The Blinkx story
In its own words, Blinkx is an internet media platform powered by the worlds most advanced video engine. We link viewers with content publishers and distributors, and monetize those interactions through advertising.
I cant pretend to know much about such things as metatag indexing, visual spiders and Shannons Information Theory, all of which feature in theblinkx CORE video engine. But, then, I dont suppose many non-specialists in the field do either.
For plenty of lay investors, the combination of world-leading kit, a massive on-line market and the potential for rapid growth in ad revenues was enough to make Blinkx a seductive story stock.
The Harvard hitman
Blinkxs shares took a massive hit at the end of January this year. Half the value was wiped off the company at one point during the day.
The carnage was caused by a blog post from Harvard University professor Ben Edelman. The self-styled adware geek cast aspersions on the ethics and sustainability of Blinkxs business model, including allegations of defrauding advertisers.
Despite a part of Edelmans work having been prepared at the request of a client that prefers not to be listed by name, and a response by Blinkx that it strongly refutes the assertions made and conclusions drawn in the blog post, the shares failed to rebound.
A story stock gone sour
In July, there was further bad news for shareholders. Blinkx announced recent trading had been below management expectations, producing a shortfall in revenue and earnings.
The company said: We attribute this performance to industry-wide issues of efficiency and effectiveness, which, in our case was compounded by the lingering effects of the disparaging blog about the Company.
Recently, Blinkx has reported continuing weakness. Management now expects revenue for the six months to 30 September to be lower than the corresponding period last year ($102-$104m versus $112m) and earnings (before interest, tax, depreciation and amortisation) to be approximately break-even versus $18m.
Awful news for a supposedly high-growth business, throwing into doubt not only the companys ability to rapidly increase revenue, but also to make a profit.
The market hasnt been convinced by Blinkxs assertion that: We have taken decisive steps to fortify our business model and realign our resources to target growing areas of the sector, and we feel confident in our prospects going forward.
Blinkxs future and the fortunes of many followers who invested at considerably higher prices than todays 30p remain up in the air.
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G A Chester has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.