If you’re an investor in high-risk growth companies, you might not be feeling too good right now — not if you invested in Quindell and Blinkx (LSE: BLNX) at least.
I went for both of them for the Fool’s Beginners’ Portfolio, though at least it wasn’t with real money (although professionally it still hurts). I dumped Quindell very quickly for what seemed like obvious reasons, but Blinkx is my other growth loser.
Blinkx looked set to bring smart new software to targeted video-based advertising, and the markets liked what they saw — and the share priced soared to more than 225p by November 2013.
Then came some scathing criticism of Blinkx, and the company has been under a sustained shorting attack ever since. We’ve seen the share price crash from that 225p high to as low as 23.75p as I write, and it even dipped further to a new 52-week low of 23.25p earlier in the day.
Were the bears right?
A key short seller was revealed last week as being Caymans-based hedge fund Tiger Global, which coincidentally has also been behind some major shorting of Quindell.
On top of that, Blinkx looks like it has been proving the bears right, at least partly. In first-half figures released on 11 November, the company revealed a pre-tax loss of $9.7m, down from a profit of $10.8m in the first six months of the previous year. Adjusted figures showed a loss of $3.4m against a profit of $15.2m.
That came after revenue for the period dropped 5%, which in the face of it is not that dramatic — but it’s not really what you want from a high-tech growth stock that’s supposed to be in its ramping-up phase, and when that initial move into profit is reversed so quickly, it’s not surprising if investors take flight.
Part of the problem is that Blinkx has failed to make the transition with its technology from desktop computing to mobile devices, with mobile revenues having climbed to 20% of total spend from 1% year-on-year. If you think the same as I do, you’ll surely agree that’s a shocking oversight!
Transforming already?
Commenting on the figures, chief executive S. Brian Mukherjee told us it is a “transformational period” for Blinkx, and that’s really not what shareholders want to hear so early in a company’s growth phase — it’s the way bosses of stumbling old dinosaurs talk when they realise the world has caught up and overtaken them.
Mr Mukherjee did say that Blinkx has moved to “target growth areas of the sector, particularly video, mobile and programmatic trading” in order to “become a leading provider of premium cross-screen advertising at scale“.
I really don’t know if Blinkx has what it takes now to recapture the initiative in such a fast-moving and high-tech business. But I am convinced it will either reboot its growth and reward new investors handsomely, or will dwindle to nothing — I don’t see a lot of middle ground here.
