Aveva tumbles 22 on currency contracts hit

Shares of Aveva Group Plc. the UK mid-cap technology firm, are taking a hammering after it revealed it would take a £14m currency and contract renewals-related hit.

Its shares tumbled 22% out of the gate—their biggest fall ever.

It looks like participation in the sell-off is widespread as the stock was the most heavily traded stock in Europe earlier this morning, with volumes six-times the daily average.

Like many moderately-capitalised technology firms, Aveva has enjoyed the benefits of the sector’s adventurous multiples.

But of course, these go hand in hand with stock volatility that also comes with the territory.

Bid speculation made the shares a summer darling for traders

Late in May, Aveva shares saw an enormous 14% spike to a six-month high after it reported a jump in full-year profit amid increased demand for its ship-design software in the Asia-Pacific region.

Then, early in July, the stock climbed for five days in a row on speculation Aveva was being targeted by a US engineering conglomerate like Emerson Electric.

French bank Société Générale added fuel to the speculative fire by suggesting General Electric, Germany’s Siemens, or France’s Dassault Systemes might also potentially be interested in the UK firm due its extremely niche business of producing design software for industrial engineers.

The bank argued this made Aveva a credible takeover target for larger peers or perhaps a big capital goods firm.

As the summer wore on though, the firm’s shares, and to an extent its business, appear to have lost momentum.

Aveva warned this morning a reorganisation of sales operation would hamper first-half revenue and said demand for its products had turned mixed with weakness in South America and parts of Asia whilst China grows in double-digits.

There is surely some premium being released from the stock this morning, given the company has made no mention today of any sort of bid interest, thereby confounding speculators who boosted the stock earlier in the summer.

On that basis, perhaps the stock could even reduce further.

Even in the generously-valued broad industrial and business software sector, Aveva’s prospective price-to-earnings at 21.3 is 35% above the average and certainly too high, in the absence of corporate interest.