Blinkx shares bounce from lows

Its been interesting keeping an eye on Blinkx’s share price since the profits warning on July 2nd. After the shares fell over 50% on the day to 32p, they continued their slide on July 3rd, finally bottoming at 27p and then bouncing to today’s 35p. Still a 45% decline in the last week is pretty shocking.

The rebound has been helped by the purchase of shares by Brian Mukherjee, Chief Executive Officer. He bought 250,000 shares in the company on the 2nd July 2014 at a price of 34.00p and his total holding is 400,000 shares, not a large holding my any means by the CEO but at least a vote of confidence.

Shorters may be well closing shorts after the pasting the shares got last week with a healthy profit. There was an interesting article in the Telegraph over the weekend, see below, which highligted that major shareholder Blackrock had been loaning its shares to shorters, a practice now stopped. Not surprising given the huge losses that Blackrock have incurred over recent months.

The forthcoming AGM should be quite an event given that many private investors are nursing large losses after the comments posted by blogger Ben Edelman earlier this year and with the company’s reputation further hurt by last week’s profit warning in part caused by Edelman’s accusations. Blinkx will hold its next Annual General Meeting on Tuesday 15 July 2014, at 9.00 am.

With around 20p of cash on its balance sheet and continued acquisitions in the online ad space, there may be companies passing a slide rule over the company as we speak after the share price collapse. But will the reputational issues deter potential buyers? Unless the company delivers a further blunder, this must be close to the lows. Gutted to have missed out on a sub-30p buy.

BlackRock restricts share lending after short selling attack on Blinkx World’s largest asset manager changes policy after losing £30m in a day over controversial blog by Harvard professor By Christopher Williams and Ben Martin7:00PM BST 05 Jul

BlackRock, the world’s largest asset manager, has barred its City office from loaning shares following a short selling attack on Blinkx, a London-listed online video advertising company in which it is biggest shareholder, The Sunday Telegraph can disclose.

Blinkx lost a third of its value in a day in January after Ben Edelman, a Harvard University Business School professor, published a 3,500-word blog post expressing “grave doubts” over the company’s prospects and criticising the “opacity” of its statements to the stock market. The company rejected his claims but the damage was done.

Professor Edelman said he had been hired by third parties to investigate Blinkx on condition of anonymity. The admission prompted accusations of a ‘bear raid’, whereby short sellers, who effectively bet that a share price will fall, aim to force it lower with negative information about a company.

At the time, BlackRock was allowing its back office to loan a portion of its Blinkx stock to short sellers. It meant that when Professor Edelman published his blog, BlackRock was helping to drive the price lower. At the time BlackRock owned 11.6pc of Blinkx, meaning it lost nearly £30m in a day.

The episode has led to a change in policy at the asset manager, it is understood, amid concerns that bear raiders are on the lookout for more targets. BlackRock no longer loans out its shares, sources said.

At the time of the raid, more than 15pc of Blinkx share were out on loan, according to data from Markit. Today the figure is only 3pc, although traders are still betting against the stock and it is the eleventh most shorted company on Aim. They enjoyed more rewards last week when Blinkx issued a profit warning and shares tumbled again.

Since Blinkx was apparently targeted, Quindell, a British company which provides technology and consultancy to the insurance industry, has also been targeted by criticism from the United States. BlackRock is not a major shareholder but holds the stock as part of its tracker funds.

Gotham City Research, the mysterious organisation that delivered a bonanza to Quindell short sellers in April, returned to the fray last week with an attack on Gowex, a Spanish wireless internet provider.

BlackRock declined to comment.

Contrarian Investor UK

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