Shares of Ariel Corp continued their roller coaster ride Monday, plunging more than 60% after two analysts downgraded the stock on concerns over dwindling cash reserves at the company and investors took profits from last week’s surge. Ariel, which makes modem cards and remote access software, fell $22.50 to close at $14.4375 after having jumped $26.25 to $37 Friday following the company’s announcement that it had received government approval of a key new product. In all, the company’s shares rose nearly ten-fold last week. In a statement issued Monday, Ariel said it had no pending announcements to explain this level of activity.
Analysts at John G Kinnard & Co and EarlyBird Capital lowered their rating on Ariel amid a general concern that the company was overvalued and the perception that it would need to raise cash in the near future, as it had only $6m on hand and is burning it at a rate of about $2m per quarter. In addition, despite winning approval for its new product, the unproven company still faces the specter of competition from larger players such as Cisco Systems Inc and Lucent Technologies Inc.
Friday’s sharp decline whittled the company’s market capitalization down to about $141m from $361m on Friday – still a huge improvement from last Monday’s level of $36m. Total volume for Monday’s session was 28 million shares – roughly 14 times its daily average – making Ariel the third most-active stock on the Nasdaq. For the first nine months of this year, Cranbury, New Jersey-based Ariel booked a net loss of $9.3m on revenue of just $8.7m.
