The stock closed at $10.41, down 76 cents, or 6.8%. It tumbled in early morning trading to $9.14, its lowest price since January 2005, before beginning a steady rebound that recovered more than half of the day's losses by the market's closing.
Volume was the highest since Digitas Inc., which includes the Digitas agency and Modem Media, went public in March 2000 (at $24 a share), with 10.9 million shares trading hands.
Downgraded to 'hold'
An American Express spokeswoman said the marketer "is not interviewing agencies for a commercial-card AOR," or agency of record. She added that American Express regularly issues requests for proposals for projects but declined to go into details.
This morning, investment bank WR Hambrecht & Co. downgraded Digitas to a "hold" rating. A research report said that "American Express is seeking ideas from competitive agencies for its commercial-card advertising and marketing business currently held by Digitas." It estimated that the AmEx's commercial-card business represented between 30% and 60% of Digitas' fees from American Express.
In an April conference call with analysts, Chairman-CEO David Kenny was bullish on the relationship, predicting fee growth in the mid-teens.
American Express is Digitas' largest client, accounting for 26% of its fee revenue in 2005, according to Digitas' 10-K annual report. General Motors Corp. is the No. 2 client, kicking in 22% of fee revenue.
Digitas executives couldn't be reached for comment.