Stock Plunges as Web Site Hunts for Firm’s Customer
Shares of Coyote Network Systems Inc., a Westlake Village-based telecommunications company, plunged 45% on Wednesday after a financial Internet site published a story saying it could not locate the company’s biggest customer.
TheStreet.com, a Web site run by Wall Street commentator James J. Cramer, wrote that it could not find Crescent Communications Inc., which reportedly accounted for about 75% of Coyote’s fiscal second-quarter sales, according to Coyote.
Coyote’s stock fell $6.44 to $7.81 on trading of 2.4 million shares, more than 23 times its three-month average. A Coyote employee said the company received at least 200 calls from brokers and stockholders.
The story said Coyote is a descendant of Diana Corp., whose once-highflying stock was eventually delisted from the New York Stock Exchange. The story detailed how TheStreet.com sought to track down Crescent, including sending a reporter to its supposed headquarters in Long Beach. It added that finding its chairman “has proved almost impossible.”
Coyote refused to comment, but an analyst who follows the company defended Coyote and Crescent.
The analyst, Vik Grover of Kaufman Bros. in New York, said the Web investment site could not find Crescent because it is based in Mexico. The sales in question were actually made to Comdisco Inc., a Rosemont, Ill.-based technology services company, which is leasing the equipment to Crescent, according to Grover.
A Comdisco spokeswoman confirmed that her company bought from Coyote about $12 million in equipment made by Coyote and others and that it is leasing the gear to Crescent. She had no further information, including when the transaction occurred.
Grover reiterated his “buy” rating on Coyote, saying it has strong prospects for growth.
“This is a real company,” Grover said. “There has been done, in my opinion, a significant disservice to investors today.”
Dave Kansas, editor in chief of TheStreet.com, said his service did “exhaustive” research in its attempt to find Crescent. It repeatedly asked Coyote for assistance, but the company was unhelpful, Kansas said, adding, “If our reader is the investor, our role is to be as exhaustive as we can when we find issues that raise concern.”
