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London-based specialist satellite operator Avanti Communications has not had the best of weeks. Last week it put out a profits warning saying it would be hit by a £7 million loan arrangement fee. It was bizarre in that house broker Jefferies then drew special attention to the statement, warning investors and shareholders to “give careful scrutiny” to Avanti’s statement. Jefferies also downgraded its ‘Buy’ advice to ‘Hold’ on July 21st.
But 24-hours later Jefferies’ cautious note had been modified and the ‘give careful scrutiny’ phrase was missing! A report in the July 27th edition of the Sunday Times also hasn’t helped buy confidence.
You might ask what in heaven’s name is going on, and it seems many investors did exactly that. Avanti’s share price tumbled day by day (closing on July 25th down 3.65 per cent) to just 165p. In March 2012 Jefferies was advising ‘Buy’ with a price target of a – now staggering – 1340p target.
Barely six months ago (in April) Avanti’s stock was trading at a buoyant 328p a share. Always a volatile stock the latest collapse is on the back of mostly good news with plenty of new business coming in, although worries about transparency at the company.
Avanti specialises in supplying Ka-band broadband services. It is expected to update investors with its latest financials on September 15th. Its July 18th statement to the Stock Exchange talks of revenues for the ear in the $64 million -$65 million range but for key costs to be higher than anticipated, first because of the bond refinancing costs of $7 million, and exchange rate changes, year-end provisioning and set up costs on large new projects.