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Verifone lost US$ 2 billion market cap

Week 49, 2007

This week sees the announcement of the agreement signed by Ingenico with Safran to acquire the payment terminals activities of Sagem, and a financial disaster for Verifone.

Verifone announced at the beginning of this week it had to restate its pre-tax profits for the first nine months of the year. After error correction, the company should have reported US$ 7.4 million (EUR 5.0 million) in pre-tax profits for the first nine months of the year, instead of US$ 37 (EUR 25.2 million) as previously announced (cf. Payment section below for details). This announcement has resulted in an instant crash for Verifone share value: the company stock lost more than 50% of its value over two days.

What remains to be understood is whether the errors were actually unintentional, and when they have been discovered. One may notice, massive share sales by Verifone management at the end of last week. For instance, just in November 2007, Douglas Bergeron, Verifone CEO sold around 179,500 shares, raising US$ 8 million (EUR 5.4 million). Together, Verifone insiders have sold more than US$ 550 million (EUR 374 million) worth of company stock this year. A class action lawsuit has just been launched.

However, analysts don't come to a consensus yet. A class action suit is launched against the company. Some analysts consider the US$ 2 billion (EUR 1.4 billion) loss in market cap an over reaction. However, Verifone CEO Doug Bergeron and CFO Barry Zwarenstein are held in high esteem by many, especially for their strategy vision.

Thierry Spanjaard
Chief Editor
Smart Insights