Barry Rubery, who made pounds 50m from the company's flotation last summer, has ceased to be a director due to "irreconcilable differences of management style" with the rest of the board.
The shares plunged 44 per cent to 86p, their lowest point since the company's flotation last June. Priced at 172p, they stood at 241.5p as recently as November.
Yesterday the company said profits for the second half of the financial year would be no better than the pounds 10.2m achieved in the first. Analysts are now forecasting full-year profits of pounds 18.2m to pounds 20.4m compared with earlier estimates of pounds 24m.
Pace blamed the warning on continuing uncertainties over broadcaster launch timetables.
Peter Morgan, chairman, said he would be take charge of the company in an executive capacity alongside David Hood, the founder and the other joint chief executive, while a replacement for Mr Rubery was sought.
Mr Rubery, who had been involved with the company since its formation in 1982, will be eligible for compensation for loss of office. He was on a one-year contract and received a salary of pounds 160,000 last year, plus a bonus of 25 per cent.
Mr Morgan said: "This is clearly a very serious situation but we believe digital broadcasting has a very good future. We are in take-off phase and some of that take-off has been deferred."
He denied the company had been over-priced on flotation. He said the parting with Mr Rubery had been amicable and did not relate to disagreements on strategy but management style. Mr Rubery still holds a near-10 per cent stake in the company and is unable to sell any shares until 1999. He could not be contacted yesterday. "I have no idea where he is," Mr Morgan said.
It is only three weeks since Pace Micro's last profits warning when it said slower sales of digital satellite receivers and the adverse effects of sterling's strength would mean there would be no over-performance on current-year budgets. Pace shares have been volatile as the market tried to second-guess the timing of the BSkyB contracts to manufacturer the set-top boxes for digital television.
Pace is on the shortlist along with companies such as Philips and Nokia.