WPP Ad Firm Falters Amid Falling Stock

WPP Group, which built the world’s largest advertising agency through heavy borrowing, was on the critical list today, the latest victim of an economic downturn in Britain and the United States.

Shares in WPP, owner of Ogilvy & Mather and J. Walter Thompson, have lost half their value since the company said Monday that profits would be lower than forecast.

The shares plunged by $3.17 to $2.84 today.

Dealers hit the panic button after the profit announcement and continued to sell today as they reassessed the vulnerability of the company in a weak advertising market.

WPP is heavily indebted after rapid expansion in the 1980s.

Its chief executive, Martin Sorrell, won fame by stealing the title of world’s biggest advertising group from Britain’s Saatchi & Saatchi, where he once worked as the financial mastermind behind the creative Saatchi brothers.

At Saatchi, and then WPP, he built holding companies for far-flung networks of prestigious advertising firms, attempting to pool the costs of global marketing agencies.

WPP and Saatchi thrived while the world economy expanded, even though Sorrell gained enemies in the gentlemanly world of advertising with his aggressive financial approach to the business.

The panic selling was caused by speculation that the company would be unable to fund acquisitions with a collapsing stock price. Analysts also cited recent cutbacks by major advertising clients, such as car firms.

WPP lost its biggest and oldest account, Sweden’s Volvo, after controversy over an allegedly misleading advertising campaign in the United States.