Blinkx (LSE: BLNX) has fallen 76% to 36p during the last 12 months, diving from a 52-week high of 230p and only just sitting above its 52-week low of 30p. But whats caused this massive decline?
Back in January, a widely read blog post appeared on the web that criticised Blinkxs business practice, stating that its recent success was outsized. Management was forced to comment on the issue, attempting to arrestthe resulting decline in share price by pointing out that the article was written by aHarvard business school professorwho was paid by unnamed third parties, refuting the assertions and reaffirming its operational and financial outlook.
But despite this rebuttal anda lack ofconcrete evidence in the blog post, Blinkxs shares kept on dropping as the market seemingly lost confidence in the company, forcing management at the end of March to announce that it spentconsiderable time, energy and resources to conduct comprehensive internal and external diligence to uncover and address the inaccurate and misleading assertions made in the blog, and finding nothing to suggest otherwise that it was in line with industry standards.
Then, in a trading update released 2 July, Blinkx revealed that trading in the first half came in below management expectations following the blog posts disparaging comments on itsblack-hat practices, which compounded industry-wide issues of efficiency and effectiveness the allegations still unproven, the profit warning resulted in the shares cutting in half in less than a week regardless, sending them down to 35p.
Blinkxs bottom line isforecastto drop by 27% in the current year and by a further 24% next year and, as a result, looks some way off being able to pay a dividend. So not a target for income investors, but how about growth investors? Well, it currently sits on a P/E of around 12, which isnt expensive but is still not particularly cheap. After such a volatile 12 months, there does not seem to beenough upside at present levels for me to consider it as a contrarian play at the moment.
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Sam Robson 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.
