The stock ended the regular session down 59 cents to $3.66. Earlier in the day, the stock dipped as low as $3.50.
While layoffs have led to a pop in share price for a number of companies in this move-to-profitability climate, such was not the case for the Bellevue, Wash.-based technology platform provider. Analysts attribute the stock's sharp decline to several issues, ranging from a large lockup of insider shares expiring last week to the fact that more mom-and-pop investors are involved in the stock as opposed to institutional investors.
Institutional investors are indeed cutting their position in the company.
"We lost confidence in the company and the stock wasn't working for us, said one portfolio manager, whose fund has since divested its stake in InfoSpace. "Their revenue estimates were coming in below our estimates."
Another portfolio manager, who has been trimming back his fund's position, said pull institutional holders have been taking action based in part on whether they "liked the old management team or the new one."
Last month, InfoSpace announced that Chief Executive Arun Sarin, and its chief financial officer and chief operating officer were resigning. Sarin, who headed Vodafone-AirTouch's U.S. and Asia operations, was seen as strategic to the company's efforts to further boost its wireless efforts. Naveen Jain, the company's chairman, returned to the role as CEO.
Analysts also attribute the stock's sharp decline to an increasing number of retail investors involved in the stock, who may not be as familiar with the company's balance sheet.
"The perception may be that these layoffs are a last ditch effort to save the company, when that's not the case at all," said Jack Ripsteen, a J.P. Morgan H&Q analyst. "This is not a distressed dot-com laying off people to stay afloat. They are well-financed and have low debt."
InfoSpace had $67 million in cash, $303 million in short-term securities and no long-term debt at the end of the year, according the company's quarterly earnings release.
This latest stock drop comes after the company announced last week that its revenue would fall by about a third from Wall Street's expectations for the year. Analysts expected the company to generate more than $300 million this year, but have since lowered those estimates to slightly more than $200 million.
InfoSpace said it would cut 250 positions from its global work force of 1,200, as the company tries to transition its business toward the faster growing wireless and broadband focus and away from its consumer business, which accounts for more than half of its revenue.
The company said it plans to give further details on its restructuring plans in the next three weeks and revised financial estimates for 2001 and 2002.
Portfolio managers, former employees and analysts said it is too early to tell whether Jain can successfully rebuild the company he founded.
"They've already had the train wreck. Now it's a question of if they can turn the company around," said Matt Finick, an analyst with Thomas Weisel Partners. "Clearly, if you look at the market and stock, people aren't that optimistic of the potential."
Finick, however, said it is too early to assess, given the company is still several weeks away from announcing its restructuring plans.