Why Shares In Blinkx Plc Tanked Today

The ill effects of a critical blog post haven’t yet abated for Blinkx Plc (LON: BLNX).

Mark Stones

Mark Stones (TMFMumbojumbones) joined The Motley Fool in 2014 and initially worked as a writer for Fool.co.uk, before joining the Fool’s analyst programme. Mark earned a BA in English from Loughborough University. Although he spends more time reading annual reports than Russian literature these days, he still appreciates a novelist’s antipathy toward the accepted view, which is a useful attitude when trying to sniff out hidden gems on the stock market. His approach to investing has been largely influenced by the principles of Warren Buffett and Peter Lynch. He also takes a special interest in the work of healthcare companies. Outside of investing, Mark plays guitar, enjoys good writing and has a guilty passion for combat sports.

Published 2 July, 2014 10:15 am BST

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.

What: Shares of internet media company Blinkx crashed this morning after warning that earnings would be lower than forecast. At time of writing the share price is down 45% at 36p.

So what: The AIM listed company saw a steep shortfall in earnings and revenue toward the end of the most recent quarter, blaming lower demand for its services (specifically its desktop search tool).

Blinkx said: “We attribute this performance to industry-wide issues of efficiency and effectiveness, which, in our case was compounded by the lingering effects of the disparaging blog.”

A blog, written by Harvard associate professor Ben Edelman, alleged that Blinkx used advertising software to “sneak” onto users computers and defraud advertisers.

Blinkx refuted the claims, but Edelman stood by his criticisms, stating “Blinkx seeks to make this a story about me rather than about their adware and their schemes against both advertisers and consumers.”

Now what: Blinkx’s revenues grew 5% year-on-year in the six months to July, but core earnings arrived $5m (£2.9m) below expectations. Blinkx shares, which were trading at over 200p in January, have since lost 80% of their value.