Image source: VeriFone Systems.
Wednesday continued the stock market trend that investors have seen throughout the week, as the S&P 500 and Dow Jones Industrials continued to move ever closer toward all-time record levels. Oil's recent rally held its ground, with crude oil staying above the psychologically important $50-per-barrel level, and the belief that the Federal Reserve could choose not to move interest rates higher later this month helped send the value of the U.S. dollar lower against most major currencies. Yet even though major market benchmarks posted gains of around a quarter percent as of midday on Wall Street, several individual stocks suffered substantial losses. Among those hardest hit in morning trading were VeriFone Systems (PAY), Flexion Therapeutics (FLXN), and MTS Systems (MTSC).
VeriFone plunged 28% after the payment processing company released its fiscal third-quarter financial report Tuesday afternoon. The company missed its own forecast for earnings by a nickel per share, weighing in with adjusted earnings of $0.47 per share. However, the bigger problem came from VeriFone's decision to cut its guidance for the full year. The payment processor now expects revenue of $2.1 billion, down by $50 million to $70 million from previous estimates. Full-year earnings per share of $1.85 would be down as much as $0.40 per share from its previous guidance range. CEO Paul Galant responded with comments indicating that VeriFone will look at strategic restructuring and other moves to shore up profitability and avoid similar shortfalls in the future, but investors want to see those measures take shape before they'll be confident in the company's path forward.
Flexion Therapeutics fell 13% in the wake of its pricing a secondary offering of stock. The specialty pharmaceutical company has a focus on treatment of patients with musculoskeletal conditions, and its lead drug candidate, Zilretta, could help millions of patients who get intra-articular injections for knee osteoarthritis. But the stock fell because Flexion sold 5.5 million shares of stock at a price of $14 per share, which was more than $2 per share less than where the company's shares closed Tuesday night. Given that the share price had doubled in a two-week span in May, however, the give-back of ground for Flexion stock seems fairly modest by comparison.
Finally, MTS Systems fell 9%. The supplier of high-performance test systems and position sensors said that it would sell 1.5 million shares of common stock in a secondary offering, along with 1 million of what it called tangible equity units. The units include a stock-purchase contract and an amortizing note, and buyers will eventually receive shares of common stock in 2019. As often happens with offerings, MTS shares fell in light of the potential for dilution of current investors' interests in the company. Given that the stock is trading at its worst levels since 2012, the timing of the MTS offering was far from perfect, and investors appear to be reacting accordingly.
