Vivendi SA was down the most in the past seven years after saying it will use a cash stockpile of $10 billion to invest in content and media, raising the concerns of investors that this plan might limit the return of monies to shareholders in the future.
The media company based in France described the markets facing Canal Plus and Universal Music Group as being competitive as well as volatile and promised to move forward with its restructuring of the pay-TV service in France.
The stock dropped by nearly 11%, its steepest intraday drop since October of 2008. It fell 8.1% to just over 19.9 euros in Paris, giving Vivendi a 27 billion euros market value equal to approximately $29 billion.
Net income for the third quarter declined 9% to just over 172 million euros excluding special items, with revenue reaching 2.52 billion euros, said the company late Tuesday.
Analysts predicted that net income would reach 186 billion euros and sales would be 2.56 billion euros.
The quarterly results have raised additional questions particularly about the Canal Plus the pay-TV business, said an analyst in Paris.
The company however has a large trove of cash that it accumulated from the sale of telecommunications assets as well as its stake in Activision Blizzards a video game maker.
Operated by billionaire Vincent Bollore the chairman, Vivendi recently purchased stakes in Ubisoft Entertainment and GameLoft two game studios as well as Telecom Italia, revisiting investments in specific industries it had recently exited.
It is important to build growth once more, said Arnaud de Puyfontaine the CEO. Vivendi said the upcoming two years would be a possible period of strong investments to create an international content and media group and there will be a focus on keeping the costs down during the same period.
Little information was provided by Vivendi about its industrial plan for its new minority stakes in the gaming groups and for Telecom Italia, said analysts and that might raise questions about the longer term cash usage beyond the committed buybacks and dividends.