Shares of Cyberplex Inc fell as much as 11 percent on Wednesday, a day after it posted a quarterly loss that sparked fears about the profitability of its advertising business and its ability to meet its debt obligations.
Barring renegotiated terms, we believe the company could be in breach of the financial covenant requiring trailing six-month EBITDA of at least C$8.5 million as soon as the end of the first quarter, Paradigm Capital analyst Gabriel Leung said in a note.
Leung downgraded the company's stock to sell from hold, and cut his price target to 13 Canadian cents from 25 Canadian cents.
The online marketing and technology services provider said in January that its operations faced significant disruptions from the integration of Yahoo and Bing search platforms in mid December.
The company said on Tuesday that the business was performing better in March, following a negative impact from the integration in the first two months of 2011.
For the October-December quarter, Cyberplex posted a loss of C$59.7 million, or 45 Canadian cents a share. Excluding charges, the company posted a loss of 2 Canadian cents a share.
Shares of the company were trading down at 17 Canadian cents on Wednesday on the Toronto Stock Exchange.
(Reporting by Amruta Sabnis in Bangalore; Editing by Roshni Menon)