CDC Corp. (NASDAQ:CHINA) stock continued tanking yesterday on massive selling out volume. The last two post-earnings release days have been hard for the stock and have presented the severe disappointment of investors, who seem currently not to see much of improvement potential.CDC Corp. stock dropped to a new 52-week low yesterday. The new bottom is at $1.70, which was hit shortly after the market opened. It was also the price at which the shares closed the market. Though, they are still not completely oversold and the coming days will show if the bottom will get updated once again. Yesterday, the volume was further growing as the pessimistic part of the market sold over 1.4 million shares, compared to around 1 million sold the previous day.
Second quarter results, announced on Tuesday, have not been favorable for the market. In 2005 CDC Corp. reorganized its business and operates currently in four segments: “CDC Software,” “CDC Global Services,” “CDC Games,” and “China.com”. The press release from Monday on a new IT consulting practice to be established by CDC Global Services was unable to prevent the following tanking on the quarter results.
It seems that the problems arise from the unsatisfactory combined performance of the last two business units mentioned above. There, non-GAAP revenues declined by 11.25%, adjusted EBITDA was not even half of the value from the first quarter and the EBTDA margin also dropped by more than 50%. The consolidated results were also shocking: the net loss of over $7 million was more than twice the value from the first quarter, and looks even worse as compared to a net income of $3.3 million for the first three months of last year. Working capital also became negative during the first six months of the year.
Some previous attempts to increase the value of CDC’s stock have also failed up to date. Last Wednesday, the plans for a 1:3 reverse stock split were announced, the event to become effective on August, 23. Also a negative signal for the market, suggesting that the management does not see fundamental improvements soon that could raise the market valuation in a natural way.
