Why have Magnite shares fallen by double digits this week?

During World War II, a common warning to maintain a potentially harmful silence was suggested by the common phrase “loose lips sink ships.”

Fast forward eighty-something years later, and we can apply this to the comments of the executive of a key business partner of an adtech company Magnite (MGNI 2.73%). This was felt to represent a sudden change in their relationship that was not favorable to Magnite. Investor reaction was negative and persistent; According to data from S&P Global Market Intelligence, the company’s share price has fallen by almost 11% since the beginning of Thursday evening.

Partner leaving?

At the digital media conference, Jamie Power, senior vice president of addressable sales at a powerhouse entertainment company Walt Disney (DIS -0.55%)apparently she said her company no longer uses Magnite. Instead, it uses platforms operated by parent company Google Alphabet and digital advertising specialist Trade Office.

However, Power’s claim has been met with some opposition, particularly from benchmark analyst Dan Kurnos. According to him, this investment was first announced in March, although investors reacted as if the Disney executive had just announced the news.

“Is Disney going to create a full ad stack without Magnite?” – Kumos asked rhetorically in a research note he published immediately after the event. “Highly unlikely (if at all, we suspect Magnite could use its leverage as a key cog in Disney’s ad stack in any next round of negotiations).”

Defense analysts

Several other experts also rushed to defend Magnite. One of them was Daniel B. Riley Day. He reiterated his Buy rating and $18.50 price target on the stock, indicating that Disney and Magnite are not fully divorced. He quoted Power as saying the latter is still “critical” to Disney’s success.

However, the arguments of these two analysts did not contribute to reversing the decline in Magnite’s share prices. Investors appear to be continuing to react to the original reports of Power’s remarks. If they require more complete explanation or clarity, perhaps the company should offer them to get ahead of the situation.