Market Chatter: Poseidon Woes to Continue for Foreseeable Future; Shares Down 12%
Poseidon Concepts Corp (PSN.TO) continued its decline today, shaving a further 12.16% off its struggling share price to hit another low of $1.30. Day range is $1.29 - 1.41. More than 1.5 million shares have been traded.
On Nov. 14, Poseidon shocked investors by reporting extremely weak earnings and writing off $9.5-million of accounts receivables that it failed to collect. Accounts receivable were $125.5-million at the end of Q3, far ahead of the actual revenue total of $41.1-million.
"The amount of receivables they were not collecting on was truly mind boggling," said Kevin Lo, an analyst at FirstEnergy Capital who was quoted in the Financial Post.
PoseidonÃ¢â¬â"¢s market value was $120-million following Thursday's decline, less than its reported accounts receivable from the third quarter.
The Financial Post noted that Poseidon has acknowledged that its management team struggled to adapt to the firm's rapid growth. Collecting receivables in the energy services business is tricky, experts said, and the process changes depending on the customer. There is a perception among investors that management was not up to the job, reports the newspaper.
The company has also blamed a slowdown in exploration and development activity for its troubles. While it is a factor, Mr. Lo said the major issue is internal controls, noting that other energy services companies are not facing the same problems collecting on their receivables.
The Post also reported that, according to RBC Capital Markets analyst Dan MacDonald, the dividend suspension suggests that PoseidonÃ¢â¬â"¢s liquidity concerns could be more serious than originally thought.
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