Shorting follows shopping at KIT digital

Contact: Brenon Daly

Following an M&A spree earlier this year that had some on Wall Street skeptical, KIT digital says it’s now in ‘harvest’ mode from its earlier deals. In the first four months of 2011, the video asset management (VAM) vendor scooped up five companies. Although that’s the same number of deals it did in all of 2010, KIT digital’s recent acquisitions have been dramatically larger than the transactions inked last year. The collective tab of slightly more than $200m for 2011 deals is five times the amount the company spent last year.

KIT digital’s big spending brought out some bears. The stock has shed about one-third of its value so far this year, compared to the flatlining Nasdaq. (It dropped another 10% on Thursday after KIT digital announced that it will be selling about $30m worth of shares at a price that’s only slightly above the low point of its valuation over the past year. The stock, which opened the year above $16, traded around $9.50 on Thursday afternoon.)

In addition, the number of people who are shorting KIT digital has doubled since the company started its fast-track M&A program. According to the most recent numbers, nearly 10 million shares of KIT digital are sold short, up from 4.4 million at the start of 2011. Conscious of that, the company said earlier this week at the ThinkEquity Growth Conference that it was almost certainly out of the M&A market for now, and that its financials are getting much ‘cleaner’ now that it has closed – and accounted for – its recent acquisitions.