Why Magnite Shares Dropped to Double-Digit Prices This Week

During World War II, a common warning to keep a potentially harmful silence was implied by the common phrase “loose lips sink ships.”

Fast forward eighty or so years later and we can apply this to the observations of an executive at a key adtech business partner tycoon (MGNI 2.73%). These were considered to imply a sudden change in their relationship, which was not beneficial for Magnite. Investor reaction was negative and lasting; according to data compiled by S&P Global Market Intelligence, the company’s share price has fallen nearly 11% week-to-date since late Thursday.

A partner leaves?

In a digital media conference, Jamie Power, senior vice president of addressable sales at the entertainment powerhouse Walt Disney (DIS -0.55%)apparently she said her company no longer uses Magnite. Instead, it uses platforms operated by parent Google Alphabet and digital advertising specialist Trade office.

However, there has been some rebuttal to Power’s claim, notably in the person of Benchmark analyst Dan Kurnos. According to him, this development was first announced in March, although investors reacted as if the Disney executive had just broken the news.

“Will Disney create a full end-to-end ad stack without Magnite?” Kumos asked rhetorically in a research note he published soon after the event. “Highly unlikely (if anything, we suspect Magnite can use its leverage as a key element of Disney’s ad stack in whatever round of negotiations comes next).”

Defense analysts

Several other pundits were also quick to defend Magnite. One was B. Riley’s Daniel Day. He reiterated his buy recommendation and $18.50 price target on the stock, stressing that Disney and Magnite are not completely divorced. He quoted Power as saying the latter is still “critical” to Disney’s success.

However, the arguments of these two analysts did little to reverse the slide in Magnite shares. Investors appear to be continuing to react to the original news of Power’s remarks. If they require a fuller explanation or clarification, perhaps the company should provide some to get ahead of the situation.