Please ensure Javascript is enabled for purposes of website accessibility

Why MDC Partners Inc. Stock Dropped Today

By Steve Symington - Apr 29, 2016 at 2:19PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The marketing company was targeted by a noted short-seller.


Image source: MDC Partners.

What: Shares of MDC Partners (MDCA) dropped as much as 23.6% early Friday, but partially recovered to trade down around 11.8% as of 12:00 p.m ET after the marketing and communications company found itself the subject of a new bearish report from short-seller Gotham City Research.

So what: The report asserts that MDC Partners stock is "worth less than $1.00 per share, implying 96%+ downside" from yesterday's close. More specifically -- and keeping in mind MDC Partners CEO Miles Nadal stepped down last year amid an SEC investigation into his expenses and the company's goodwill and other accounting practices -- Gotham City Research believes that MDC Partners will need to restate several years of historical results given issues including overstated organic revenue growth, understated debt levels, and "suspect" profits.

Now what: MDC promptly issued a statement today insisting it remains confident in its financial reporting and account practices, as well as calling the allegations "false and misleading" and "solely focused on destroying the value we are creating for our shareholders for their own personal gain." 

As it stands, it's certainly possible that Gotham City Research is capitalizing on investor uncertainty in the wake of the SEC investigation. But it's also unsurprising to see our skittish market take a step back today given the gravity of the allegations. In any case, we should receive more clarity from the company when it releases quarterly results next week. Until then, I'm personally content watching this drama unfold from the sidelines.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

MDC Partners Inc. Stock Quote
MDC Partners Inc.
MDCA

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/21/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.