CNN Money speculated in an article several days later that one strategic option available to New Frontier is a takeover by another company.
Shares of New Frontier, which is traded on the NASDAQ stock exchange, have surged upward nearly 25 percent during the past three months, despite the company’s reported first quarter decreases in both sales and income.
CNN Money reporter Paul La Monica said the stock’s strong showing at a time when the company’s financial performance has been lagging “could be due to takeover speculation” rather than fundamentals.
“The stock shot up 6 percent on Tuesday [Aug. 16] after the company said it was ‘considering strategic options,’ a phrase that is often interpreted by Wall Street as a ‘For Sale’ sign,” La Monica said.
New Frontier operates video-on-demand and pay-per-view channels. The company saw rapid growth in profitability during 2004 but has faced increase competition as Playboy, Hustler and other brands have made inroads in the company’s primary business categories.
CEO Michael Weiner in a May conference call said New Frontier realizes the next 24-36 months will be a dog fight for market share, while CFO Karyn Miller has added that the company will ramp up marketing by around 20 percent to deal with increased competition.
More recently, New Frontier announced that it has retained Averil Capital Market Group, a boutique investment bank that specializes in mergers and acquisitions, to “assist in exploring strategic options that may enhance shareholder value.”
The company offered no specific information about possible deals — saying, in fact, that the review may not result in any transactions at all — but said the Board of Directors would carefully consider any options to improve New Frontier’s growth prospects.
Representatives from New Frontier did not return calls from XBiz.