Bankrate (RATE) Asks for More Time to File 10-K with SEC - Analyst Blog

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Shares of the online financial rate information provider, Bankrate Inc. RATE , plunged nearly 5% in yesterday's after-hour trading session following the company's request to delay 10-K filling with the U.S. Securities and Exchange Commission (SEC).

The company has been in troubled waters since Sep 15, 2014 when the SEC launched a probe into its financial reporting for the second and third quarters of 2012. The investigation committee is mainly examining three accruals of revenues totaling $781,000 and two adjustments totaling $850,000 made to reduce accrued expenses.

Following the SEC probe, the then chief financial officer (CFO), Edward J. DiMaria, stepped down. However, he still holds the position of senior vice president of the company.

Several law firms including Levi & Korsinsky, LLP and Robbins Arroyo LLP are also investigating the company's board members to find out if they violated any fiduciary duty.

Taking stock the ongoing SEC probe, Bankrate's audit committee in Sep 2014 decided that the financial statements issued for 2011, 2012 and 2013 should not be relied upon until the probe is completed.

Moreover, Bankrate has not announced the financial results for the third and fourth quarters or full-year 2014. However, in its last business update issued on Nov 6, 2014, the company provided preliminary selected third-quarter 2014 results. The company had posted adjusted revenues of $141.8 million and adjusted earnings of 15 cents per share for the third quarter.

The ongoing SEC investigation and the delay in 10-K filing indicate that there might be quite a few loopholes in the company's financials, in our view. Apart from this, the situation raises questions about management's capabilities.

Going forward, even if the company overcomes the SEC probe, it will not be easy for it to remain on the growth path due to loss of investors' and customers' faith and stiff competition. The company competes with various financial institutions as well as several websites dedicated to specific personal finance products and lead aggregators.

Currently, Bankrate carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Internet content space are Everyday Health Inc. EVDY , Taomee Holdings Ltd. TAOM and Tucows Inc. TCX . All these stocks carry a Zacks Rank #2 (Buy).

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