Silverjet, the start-up business-class only airline, was the worst performing small cap stock yesterday after an analyst set a share price target of nil for the company and branded it "likely to fail".
In an unusually brutal note, Mike Stoddart, an analyst at Daniel Stewart & Co, initiated coverage on the company by advising investors to "sell at any price". The note comes just three weeks after MAXjet, a rival business-class only carrier, filed for administration under a mountain of losses and debt.
Silverjet fell 28 per cent to 35.5p. It issued a Stock Exchange announcement pointing out "numerous material mistakes and inaccuracies" in the note, including an assumption that return flights cost nearly twice as much to operate than they do in reality. The company said it remained confident that it would hit its target of reaching pre-tax profitability by March.
Silverjet, which began service a year ago this Friday, flies its fleet of three 767's – refitted to fit 100, lie-flat beds – from London to New York and Dubai. Mr Stoddart argued that its declining load factors – 52.8 per cent of seats filled in December – is far too low to keep it airborne. Silverjet's largest investors are the Reuben Brothers, who have given loans to the company convertible next month to a 22 per cent stake.
Asked why he would publish a 32-note page note on a firm he thought was worthless, Mr Stoddart said: "I'd done a lot of work on it, so I thought it would be better to make some use out of it."
Arden Partners, the company's broker, put out a note with an opposed view yesterday, urging investors on with a "Buy" rating and forecasting a more than quintupling of its 2007 revenue.Reuse content