Hard on the heels of Wednesday’s 20% freefall [WAMN: 13-Jun-02], stock in Omnicom Group took another pounding Thursday, shedding a further 12.3% in value. In frantic trading, shares hit a low of $50.94 (€53.98; £34.60) before recovering slightly to end the day at $54.60.
In just two days, the group’s market capitalization has plunged 30% to $10.2 billion. Nor was market confidence in the advertising and marketing conglomerate enhanced by a class action lawsuit, filed Thursday by New York shareholder litigation firm Wolf Popper.
This alleges that Omnicom misrepresented its financial results and misled investors regarding its organic revenue, future payments due on acquisitions and its relationship with an entity [Seneca] that holds its interactive investments.
A dazed Omnicom spokesperson said that although its senior executives had seen only the litigants’ press release, “we completely disagree with that they said.”
Within days of a critical article in the Wall Street Journal, Omnicom has seen its stock value in freefall and its rating downgraded by Standard & Poors from ‘stable’ to ‘negative’. Generally, however, the entrail-rakers are undecided whether the affair is a serious indicator of the group’s instability or little more than a storm in a teacup.
An advertising analyst at Suntrust Robinson Humphrey, reduced the stock from ‘outperfom’ to ‘neutral’, commenting that events have created a “crisis of confidence among investors” that will drag down the stock near-term.
UBS Warburg reaffirmed its ‘buy’ rating but lowered its target price from $100 per share to $82, warning that the storm will bring Omnicom down to the average pricing for agency stocks in the short term before recovering.
Ironically, meantime, the ad group has become the latest in the post-Enron Gadarene rush to dump Arthur Andersen in favor of another auditor. It disclosed yesterday (Thursday) that KPMG LLP would take over its audit duties with immediate effect.
Data sourced from: AdAge.com; additional content by WARC staff