WebMD Stock Plunges on Trifecta of Bad News

Joel Anderson |

WBMD, YHOO, 1688.HKG, Carl Icahn, George Soros, WebMD, sale, buyout, rumors, guidance, pharmaceuticals, Yahoo Japan, Alibaba, YahooShares in WebMD Health Corp (WBMD) fell almost 30 percent in early trading after news that the company would not be sold. The company also announced that CEO Wayne T. Gattinella was resigning and that financial results won't meet expectations.

Investors Feeling Ill

However, a press release today revealed that while the company's board explored the option of a sale in late 2011, it is no longer seeking out potential buyers. This seemed to reveal that some of WebMD's share price was being propped up by rumors of a potential sale, but the precipitous drop in the company's stock had other potential reasons. The release also revealed that Gattinella was stepping down and that CFO Anthony Vuolo would serve as interim CEO. Martin J. Wygod, Chairman of the Board of Directors, said of Gattinella's departure:  "We thank Wayne for his contributions in making WebMD the leader in health information services. With my support and that of the Management Committee, I am confident that Tony will lead a smooth transition as the Board conducts a search for a new CEO."

Finally, finishing out the triumvirate of bad news, the company also indicated that it expects revenues to be 2 to 8 percent lower in 2012 than they were in 2011. In its press release, the company stated the reasoning: "WebMD's fourth quarter sales activity for advertising and sponsorship products was less than anticipated and reflects a challenging business environment for certain pharmaceutical company customers and a more competitive landscape in the consumer products markets." Along with this anticipated drop in marketing and consumer products revenues, the company also stated its expectation that expenses would increase by some 5 to 8 percent.

Big Investors May Have Misdiagnosed

The speculation about the sale of WebMD dates back to last fall when billionaire investors George Soros and Carl Icahn each revealed large stakes in the IT health giant. Icahn's stake in the company is 9.5 percent while Soros revealed recently that the 5.6 stake he disclosed in October had increased to 6.14 percent. Icahn, though, didn't want the company to sell, instead pushing for a stock buyback program of $1 billion that now seems unlikely at the $36 a share price Icahn was pursuing. Buyout rumors included speculation that WebMD might be included as part of a deal between Yahoo (YHOO) and Alibaba (1688.HKG) to acquire Yahoo's Asian assets.

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Companies

Symbol Name Price Change % Volume
AMIBE American Boarding Co n/a n/a n/a 0
WBMD WebMD Health Corp 50.30 -0.38 -0.75 469,139
YHOO Yahoo! Inc. 42.80 -1.35 -3.06 31,888,521

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