Why Partner Communciations Shares Flopped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Partner Communications (Nasdaq: PTNR  ) finished down 10% today, after a class action lawsuit was filed against the Israeli telecom.

So what: The suit alleges that Partner illegally charged prepaid subscribers for services from content providers. Lawyers are asking for about $180 million in damages as a result. In response to the claims, Partner said "it was unable to evaluate, at this preliminary stage, the probability of success of the lawsuit or the range of potential exposure, if any."

Now what: Considering the claim alone shaved off nearly $100 million in market value despite asking for only $180 million, the market seems to be overreacting. Class action suits of this nature are almost always settled, if certified and found meritorious to begin with, and generally the defending company pays out significantly less than is initially demanded. The company recently canceled what had been a handsome dividend payout, so investors may be jumpy about any additional bad news. Still, the stock is already priced relatively cheaply, so today's news alone does not look like a reason to sell.

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