Why Did MDC Partners’ Stock Lose More Than Half Of Its Value On Friday?
Shares of MDC Partners, (NASDAQ: MDCA) a provider of marketing, advertising and strategic consulting solutions, saw its shares lose more than half of its value on Friday after the company reported its third quarter results.
MDC Partners said that it lost $0.64 per share on revenue of $349.3 million.
Although revenue did rise more than six percent from a year ago and organic revenue grew 2.7 percent, net loss for the quarter worsened to $33.5 million from a loss of $8.6million in the same quarter a year ago.
Adjusted EBITDA for the quarter also decreased 13.5 percent to $46.3 million.
Net loss attributed to the company for the first nine months of 2016 worsened to $55.7 million from a loss of $11.1 million in the same period a year ago.
As of the financial metrics weren’t enough to send investors running for the hills, the company suspended its dividend to free up over $11 million in cash per quarter. The company did however pledge to use the savings to enhance its liquidity, accelerate a de-leveraging of its balance sheet and support growth initiatives.
The company also revised its 2016 outlook lower to reflect the company’s expectations for a “diminished revenue recovery” in the bottom half of the year in addition to upfront costs that are associated with restructuring initiatives.
Specifically, the company lowered its full year 2016 revenue guidance to a range of $1.365 billion to $1.375 billion, Adjusted EBITDA of $170 million to $180 million. This compares to the company’s prior guidance of revenue of $1.390 billion to $1.420 billion and Adjusted EBITDA of $205 million to $215 million.
MDC Partners CEO Scott Kaufmann
According to Adweek, MDC Partners CEO Scott Kaufmann was quoted as saying that the company’s “performance just isn’t good enough.”
Investors seem to agree.
On the other hand, the advertising focused publication did highlight a Tweet from Ogilvy & Mather’s worldwide chief digital officer Brandon Berger. The expert pointed out that following Friday’s plunge in MDC Partners’ stock, it is now trading at a valuation that is less than the value of its individual assets, including 72andSunny, Anomaly and CPB Group.
Perhaps this fact is attractive in the minds of a strategic buyer. After all, The Wall Street Journal did report that MDC Partners is actively exploring strategic alternatives, including a potential sale of itself.
It is also important to highlight the fact that MDC Partners’ has seen its share of negative press as of late.
The company’s ex-CEO Miles Nadal and Chief Accounting Officer Michael Sabatino stepped down from the company last July amid an SEC investigation which focused on millions of dollars in questionable expenses. While Nadal did agree to pay back the company a total of $21 million, the reports may still be fresh in investors mind.