Dump of the day was OzForex (OFX) whose shares plunged 42% after the foreign exchange trading company revealed that the marriage bans with Western Union has ended – and, oh, there’s an earnings downgrade.
In November, OzForex confirmed it had received a “preliminary, non-binding, indicative conditional proposal” from Western Union (WU) to buy all the shares in the company for between $A3.50 to $A3.70 per share, valuing it at up to $A888 million.
But then everything went quiet as talks between the parties continued, and continued, and continued without any announcement.
Then, yesterday morning, the proposed marriage was over and OzForex was telling the ASX that although discussions continued for some months, WU had not submitted a binding proposal. As a result OzForex’s board terminated discussions with its one-time suitor.
OzForex also provided a trading update, which helped produce the slide in the value of the shares to $1.79 at the close.
OFX 1Y – Ozforex hammered as Western Union walks
OzForex said that because it had anticipated the success of the WU offer and a rebranding, it reduced its advertising spending and wasn’t able to attract as many new clients.
Additionally, “decreased volatility in the FX markets reduced the level of trading activity from both new and existing clients compared to expectations.”
That meant that while fee and commission income in the December quarter rose 9%, it was below expectations, and the company expected to book underlying earnings before interest, tax, depreciation and amortisation of between $A35 to $A37 million for financial year 2015-16, “which represents growth versus the prior corresponding FY15 period, but is lower than previous guidance provided.”
The shares are now well under its late 2013 $2 share IPO price.
