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The news was initially greeted badly by investors in Dublin, where shares hit an all-time low of EUR0.95 on the Irish Stock Exchange. But the shares later rallied and near the end of the day's trading had risen to EUR1.10 on the ISE, up almost 5 percent. In New York, the news prompted a strong open for Riverdeep's American Depositary Shares, which were up 5 percent in early trading to around USD6.61.
The e-learning company, which is in the midst of purchasing US software company Broderbund, said that it will voluntarily de-list its American Depositary Shares from the Nasdaq. It is expected that this de-listing will be effective from the close of business on Thursday 03 October 2002, Riverdeep said. Trading of the company's ADSs on the Nasdaq will cease upon de-listing.
Each ADS represents six ordinary shares in Riverdeep and currently, the Ordinary Shares are secondarily listed on the Irish Stock Exchange, which after the move will become the primary listing for Riverdeep stock.
"Riverdeep's decision today to de-list its ADSs from Nasdaq has been taken in an effort to consolidate the company's trading liquidity on one market," said Riverdeep Executive Chairman and Chief Executive Officer Barry O'Callaghan. "The Irish Stock Exchange is the company's domestic market and the market on which historically all major placements have occurred since IPO.
"The board feels that this move will better reflect the needs and European domicile of the company's shareholder base, including its strategic, institutional and retail shareholders," O'Callaghan added. "We will continue to report quarterly and expect to announce our results for fiscal quarter ended 30 September 2002 in early November."
As the numbers show, the move sent Riverdeep shares spiralling downward initially as analysts scrambled to understand why the decision, which one Dublin analyst described as "radical," was made. Another Irish analyst said that perhaps the company's recent negative publicity, which 11 days ago sent Riverdeep shares dramatically lower, could offer some explanation for the move to what is regarded as a more stable European bourse.
On 19 September, Riverdeep stock plummeted after what appeared to be a profit warning from the company, but was this was later described as a misunderstanding.
Riverdeep broker Davy Stockbrokers issued a note on 19 September, which indicated that the e-learning giant's gross margins were set to decline as a result of lower margins at Broderbund. However, by the next day and throughout the weekend, Riverdeep insisted that it was not issuing a profit warning, but by that point damage had already been done, and the company's stock remained depressed.
Moreover, many analysts responded to the Davy note by lowering earnings forecasts for the company, adding to a maelstrom that caused investors to sell their shares in droves.
The next day, O'Callaghan said that the firm had not lowered earnings forecasts and that the USD57 million purchase of Broderbund was "accretive" to earnings.
This confusion, and other worries in the minds of analysts and investors, has caused the firm's value to decline rapidly, despite the fact that it continues to produce strong revenues and profits, one analyst said. In its most recent results, Riverdeep revealed that its fiscal fourth-quarter net income was USD7.8 million after a loss of USD6.8 million in the year-earlier period. Revenue rose to USD51.9 million from USD20.4 million.
Riverdeep is seeking to purchase Broderbund from Gores Technology Group, in order to boost its line-up of consumer and educational products. Broderbund makes brands such as Print Shop, Print Master and Family Tree Maker.
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