It’s been a rocky couple of weeks for the S4 Capital (LSE:SFOR) share price. It seems speculation and rising uncertainty are making some investors doubt their positions. So much so that in the final few days of March, the stock crashed by around 40%! So what exactly is going on? And is this a buying opportunity for my portfolio? Let’s take a closer look.
The crashing S4 Capital share price
When a stock collapses by double digits, it’s usually triggered by a bad earnings report. But in this case, it’s the complete opposite. A few months ago, management delayed the release of its 2021 results, citing that Covid-19, specifically the Omicron variant, had caused disruptions.
Delaying results under such circumstances, while frustrating, is pretty understandable. However, the day before the rescheduled release date, management announced the results need to be delayed once again. Investor patience was already stretched, so this revelation wasn’t exactly met with enthusiasm. And consequently, the S4 Capital share price took a nosedive.
The question on everyone’s mind is, what’s behind these delays? Officially, PwC (the firm’s auditors) could not complete the necessary work on time that would allow S4 Capital to release its preliminary statements. Yet, with no further clarification and no new release date for its 2021 results, speculation is brewing that something else is happening under the surface.
Suppose the delays are actually being caused by accounting discrepancies that PwC is unable to rectify? In that case, this could be the start of a massive share price tumble for S4 Capital. However, there is currently no evidence of foul play. And this may be just a case of PwC falling behind schedule. So should I be considering this as a buying opportunity?
Time to buy?
Since its inception in late 2016, S4 Capital has delivered some impressive results. In fact, the group’s top line has expanded by an annual average of 59%! And with operations becoming profitable in 2020, this business looked like it was firing on all cylinders before this recent hiccup.
What’s more, this growth might not have slowed down since management said it believes the 2021 results are in-line with market expectations, with the strong performance continuing into 2022. This seems to have given Permian Investment Partners confidence in its long-term potential, and the hedge fund used the drop in price as an opportunity to increase its stake in the business.
Personally, I remain unconvinced. In my experience, multiple delays to the publication of results with vague explanations isn’t a good sign. And if it turns out there is a fundamental problem with the business, further substantial declines in the stock could be on the horizon.
So while the S4 Capital share price might currently be trading at a bargain, it’s not one that I’m personally interested in taking until the results finally emerge.