Shares in digital media group S4 Capital (SFOR) extended their downward spiral on Thursday as investors continued to digest news of another delay in the publication of its 2021 results.
The shares dropped a further 11% today after shedding more than a third of their value yesterday (30 Mar).
THE FEAR FACTOR
There are several concerns that explain the collapse in the share price. The date for the publication of results has now been re-scheduled twice, after the company rescheduled in early March.
S4’s auditor PwC had requested extra time to finish its work, citing the impact of Covid and Omicron on travel and resource allocation, specifically in the Netherlands.
PwC yesterday said it had not been able to finish work checking the results, meaning the numbers could not be published. That has ignited fears in the market that the auditor has uncovered a serious problem.
The collapse in the share price presents S4 with an additional problem given its acquisition strategy has been predicated in part by issuing its own shares. Therefore the sharp fall in the value of its equity might make future deals harder to close.
CREATION OF S4 CAPITAL
When he was boss of WPP (WPP), S4 Capital chief executive Martin Sorrell recognised that digital disruption was forcing companies to change their business models and reach customers in different ways.
This observation formed the central tenet in the philosophy behind the creation of S4 Capital in 2018 and the associated pivotal acquisition of Media Monks in July 2018 (a creative digital production company) for $350 million.
This was followed five months later by the acquisition of San-Francisco based consultancy MightyHive, a specialist in programmatic advertising, for $150 million.
These two acquisitions enabled S4 to offer full service digital marketing from creative work to media planning and buying campaign advertising space.
