On 29-May-2013, penny-dreadful CUP (Cupid) announced
(http://is.gd/x9B4Lj) the following:
* it confirms that it is in discussions about selling off it’s casual dating businesses
* revenues are expected to be up, but down 1% on a like-for-like basis. Increased marketing spend is expected to half EBITDA for the half-year.
The share price has taken a hammering, and now stands at 58.02p, having stood at a peak of about 94p last Wednesday. Ouch.
I have some bragging rights to claim here, because on 16 April I stated (http://is.gd/g2PGrF): “I see an added danger to the chart, in that there is a risk that we could see a sudden fall in the share price back down below 60p. There’s a downtrend, and when people realise that a return to higher levels is looking increasingly unlikely, they will dump the stock.” And who says charting doesn’t work?
Actually, there was no guarantee that the drop-off was going to happen. Firstly, I think there’s a “probabalistic” chance of it happening, rather than being pre-ordained. If I had to guess on a chart like QPP, I’d say that a similar thing probably wont happen over the shorter term. There seems to be some optimism returning that share, so a further plunge is less likely, over the short term. I’m still bearish on the stock in general, though. I see further dilution on the cards on the assumption that QPP will try to expand further, and I foresee further weaknesses in the share prices as lockins expire. I expect a profit warning sometime in the future, although I can’t give timeframes. The directors will try to keep the thing in motion as long as possible, and their aggressive financing tactics and posturing means that the illusion could be maintained for much longer than I might expect.
Anyway, back to CUP. The recent drop happened over about the right timeframe, although probably towards the tailend of a reasonable expectation. The drop was precipitated by the RNS, so it could be that my previous call was correct only by coincidence. I might have also expected a dead cat bounce from the fall, but that hasn’t happened (yet) – that could possible play out over the next few days. I’m thinking that, on the balance of probabilities, it wont happen, though, because there seems to be an “asymptotic decline” in the share price, rather than the sharp-down, sharp-rebound pattern that I would have expected to see.
The RNS is interesting in the way it raises questions, by doesn’t answer them. There’s a lot that isn’t being said. I’m wondering if the sale of the business is due to regulators snooping around. Maybe the audit has something to do with it. The whole revenue decrease and marketing spend increase needs consideration, too. Are they facing fiercer competition, is the reputational damage affecting them, or is the customer pool declining?