During World War II, a common warning to keep potentially damaging quiet was implied by the common phrase “loose lips sink ships.”
Fast forward eighty-some years later, and we can apply that to the remarks of an executive at a key business partner of adtech company Magnite (NASDAQ: MGNI). These were taken to imply a sudden change in their relationship that was not beneficial to Magnite. The investor reaction was negative and lasting; according to data compiled by S&P Global Market Intelligence, the company’s stock price was down by nearly 11% week to date as of early Thursday evening.
In a digital media conference, Jamie Power, senior vice president of addressable sales at mighty entertainment company Walt Disney (NYSE: DIS), apparently said that her company no longer uses Magnite. Instead, it’s utilizing platforms operated by Google parent Alphabet and digital ad specialist The Trade Desk.
There was some pushback to Power’s assertion, however, specifically in the person of Benchmark analyst Dan Kurnos. According to him, this development was first announced back in March, although investors were reacting as if the Disney executive had just broken the news.
“Is Disney going to create a full end-to-end ad stack without Magnite?” Kumos asked rhetorically in a research note he published just after the event. “Highly unlikely (if anything, we suspect Magnite may utilize their leverage as a key cog to Disney’s ad stack in whatever round of negotiations take place next).”
Several other pundits also hastened to defend Magnite. One was B. Riley’s Daniel Day. He reiterated his buy recommendation and $18.50 price target on the stock, pointing out that Disney and Magnite are not fully divorced. He quoted Power as saying the latter was still “critical” to the success of Disney.
Yet the arguments of these two analysts did nothing to reverse Magnite stock’s slide. It seems investors are continuing to react to the original news of Power’s remarks. If these require fuller explanation or clarity, perhaps the company should offer some in order to get ahead of the situation.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Eric Volkman has positions in Walt Disney. The Motley Fool has positions in and recommends Alphabet, The Trade Desk, and Walt Disney. The Motley Fool recommends Magnite. The Motley Fool has a disclosure policy.
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