There's many a slip twixt the CUP and the lip!

Oh dear, what's happened to Cupid? On Friday the shares fell a massive 57% after the company released a statement about the appointment of auditors to investigate recent press speculation about the activities of the company's 'motivation team'.

I wrote about Cupid in August 2011, and although I never did purchase shares in the company I did leave them on my monitor just in case the share price fell back to enter my value based criteria:-

http://michae1mouse.blogspot.co.uk/2011/08/will-you-fall-in-love-with-cupids.html

I wrote the article when the shares were priced around the £2.50 mark. Now the shares are trading at about 50p, a quick glance at the recent finals would suggest that the shares are now a bargain basement price. The company has achieved outstanding growth since listing, and currently sit on a single figure p/e ratio with plenty of cash on the balance sheet and no debt.

Am I tempted to buy at these levels given the current situation?

Certainly the fundamenals are seductive, and I do wonder how damaging these allegations will be in the long run? What's the worst that can actually happen here? How many users will actually care that much about these allegations, particularly if their experiences have been positive?

I've no idea how much a year's subscription to a site like this would cost, so even if the company are found to have deceived/duped customers into signing up (which hasn't been proven yet) what sort of compensation is likely to be payable, and exactly how many lonely hearts are likely to want to come forward anyway? Of course, it's difficult to gauge the extent of any possible lasting damage and that's why the shorters are currently enjoying a field day with planting doubt in the minds of shareholders and potential investors.

My own feelings are that this may just turn out to be a very temporary blip for a rapidly expanding company that has a presence in 15 different countries. Certainly online dating appears to be a huge growth area. This could turn out to be a massive opportunity to buy shares whilst they are extremely cheap.

From a bear perspective though, one thing does worry me. From 2011 to present, the Director sells have far outweighed the Director buys, apart from a recent purchase from Bill Dobbie. If this is such a great growth story why have the Directors been cashing in so early on in its history? In fact Martin Higginson (a non-exec) sold his entire holding in 2011 (although I don't know if he is stilll a non-exec?).

I'm not going to guess what the final outcome from all this will be, nor am I going to buy or short sell the company, but I do have sympathy for current shareholders since this is one of those situations where at around £2, on all fundamentals, the company did look at least fair value until all the recent shenanigans.

I suppose it's now a trust thing for shareholders, and in any relationship there's got to be an element of trust if there is going to be any future at all!!