The Irish software company CBT took another pounding on the Nasdaq market yesterday as short-term investors dumped millions of shares. By evening, the share price had fallen another 30 per cent to under $11. Earlier this month shares were being bought at $60.
The sell-off follows a statement by the company late on Monday admitting that it had lost a major contract and would not make the third-quarter earnings figures expected on Wall Street. But, despite not meeting expectations, the company still predicts it will remain in profit.
Mr Howard Block, of BancBoston Robertson Stephens, a leading analyst who has monitored CBT shares closely, said the company had fallen victim to a number of factors.
"Here you have a high-flying stock, with a very large multiple. And stocks that are on high multiples are precariously positioned; if there's any kind of bad news it's easy to knock them off and watch them plummet," he said.
CBT's high share value had attracted a lot of short-term "momentum" investors, he added, who systematically bail out of any stock at the first sign of a slowdown in earnings, putting downward pressure on the share price.
"The second thing is that the company has never disappointed the Street before - they put up 14 quarters in a row of upside. By telling us that there's a shortfall somewhere, it forces people to rethink what they had perceived as an extremely visible business model," Mr Block added.
Another analyst, Mr Tony Crooks, of First Call, said investors were in nervous humour, and intolerant of companies that did not meet expectations: "Wall Street is punishing companies that don't make earnings."
But while the paper worth of the company has been reduced to one sixth of its former value in just two weeks, most observers say CBT is fundamentally sound, and that shares can still represent a good buy.
"It depends on your time horizon," Mr Block said last night. "If it's one week, probably not; if it's one year, absolutely."
The company, which makes educational software, employs 1,100 people worldwide, including 450 at its research centre in Clonskeagh, Dublin.
