Violeta Slavtchevska

Level 3 Communications, Inc. (NASDAQ:LVLT) Bores Investors With PRs Instead of Real Results

by Violeta Slavtchevska July 5, 2010
LVLT.pngAfter the remarkable price drop from the previous day, on Friday Level 3 Communications, Inc. (NASDAQ:LVLT, LVLT message board) recent losses in value got even more dramatic. The close on Friday at $0.97 was a new 52-week bottom for the stock and it came after the massive sale from last week, when already on Tuesday the previous support was broken.

On Friday, it seems that most selling investors have managed to give away their shares and the volume of 11 million shares was lower, but considering that the stock has not been oversold yet, the market is wondering if the price can tank even deeper.

Last Thursday's press release about Level 3 being chosen as the online and mobile content delivery provider for the 2010 the Tour de France had the adverse effect on the stock price. Probably investors were tired of reading press releases, not supported by real business results.

With questionable success and to ensure broader coverage, the press release was sent out on Friday as well, quoted in the newsletter of an investor relations firm, who claims to see its purpose solely as to encourage investors to conduct their own due diligence on the companies profiled, but reserves its right to buy or sell any of those same companies. Further, the IR company says it is being compensated either in cash, or in "an exchange of services" for its promotional campaigns. In the case of Level 3 stock, no cash compensation is disclosed.

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It is not clear since when Level 3 Communications is engaging promoters, but the first disclosed promotion, done by the same IR company, dates back to May last year. The long-term chart shows, that this a period when the stock appreciated sharply, and has usually managed to stay above the $1 barrier. Until the beginning of May this year, when the first quarter results were filed.

Revenues have been declining and net losses have been growing progressively over the past year. The business seems not to be growing, but to be shrinking and since the end of 2008 the number of employees has been reduced by 7%. Though, currently the market is still highly exorbitant about the stock relative to the assets the company has, but it only gives even more potential for further decline in the price.

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