The stock value of holding company MDC Partners, which owns Anomaly, 72andSunny, CP+B and other agencies, dropped precipitously before the New York Stock exchange's opening bell on Friday after the company failed to meet revenue goals for the third quarter of 2016.
The stock value is down more than 60 percent over the past 24 hours from $8.40 per share at the NYSE's close on Thursday to less than $3 at 11 a.m. this morning. Wells Fargo analysts downgraded the stock's rating from "outperform" to "market perform" in a note issued to investors on Friday.
The company reported a net loss of $33.5 million for the quarter versus an $8.6 million loss in the same quarter last year. It also hired LionTree Advisors to help manage its financial strategy moving forward.
As noted in this tweet from Ogilvy & Mather worldwide chief digital officer Brandon Berger, the trade value of the MDC Partners network is now less than that of its individual agencies.
— Brandon Berger (@brandonberger) November 4, 2016
"This performance just isn't good enough," said MDC Partners CEO Scott Kaufmann during Thursday's earnings call, according to MediaPost. Kaufman, who replaced founder Miles Nadal following his resignation amid an SEC investigation late last year, added that MDC is "taking actions to fix it."
Nadal and chief accounting officer Michael Sabatino abruptly stepped down from MDC Partners last July as the SEC targeted millions of dollars in "questionable expenses," and Nadal later agreed to pay his former company a total of $21 million only weeks after MDC completed its acquisition of 72andSunny.
In October, short-seller Gotham City Research—which has criticized MDC Partners repeatedly in the past—tweeted that the company could be on a list of businesses targeted by the Securities and Exchange Commission for "misusing adjusted earnings metrics." This SEC probe was first reported by The Wall Street Journal, which named Elon Musk's Tesla Motors and medical device company Syneron as businesses that had potentially used numbers "that don't conform to generally accepted accounting principles" in order to inflate their financial performance.
Thursday's press release addressed these numbers with the following statement: "Management believes that such non-GAAP [Generally Accepted Accounting Principles] financial measures, when read in conjunction with the company's reported results, can provide useful supplemental information for investors analyzing period to period comparisons of the company's results."
The company also lowered its revenue guidance for the calendar year of 2016 from between $1.39 billion and $1.42 billion, to between $1.365 billion and 1.375 billion. It also revised guidance on its EBITDA from between $205 million and 215 million, to between $170 million and 180 million. According to the earnings call, international earnings rose thanks to MDC Partners' June acquisition of Forsman & Bodenfors, the Swedish agency best known for Volvo's "Epic Split" campaign.
An MDC Partners spokesperson declined to comment today on the financial status of the company beyond the quotes included in the press release and the earnings call.