Magnite, Inc. investors, represented by Kaplan Fox & Kilsheimer LLP, are looking into claims by short-seller Spruce Point Capital Management that the company allegedly misled investors and thereby violated federal securities laws.
Magnite shares dropped 6% after plunging as much as 13% during the day following the short-seller report released on Jan. 7. The company describes itself as the world’s largest independent sell-side advertising platform.
The Spruce Point report alleged that the 2020 merger between Magnite (MGNI) and two advertising technology companies was “predicated on cost and not revenue synergies” and that the companies were faced with “business and accounting struggles prior to the merger.” The report also claimed that the two companies hid these challenges from investors with inaccurate financial reporting.
Furthermore, Spruce Point accuses Magnite of overstating its growth prospects and valuation figures, and has warned investors that they see potential downside risk of between 25% and 50%. (See MGNI stock analysis on TipRanks)
Needham analyst Laura Martin assigned a Buy rating to MGNI almost three weeks ago and set a price target of $30. (17% upside potential)
Martin called Magnite her “top pick” for 2021 in an interview on CNBC, noting a number of tailwinds for the company including strong fundamental momentum, a macro economy rebound and an expanding connected TV market.
Overall, consensus among analysts is a Strong Buy based on 7 Buy recommendations. The average price target of $20.76 implies downside potential around 19% over the next 12 months.
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