Management and shareholders at US e-learning firm SkillSoft must be kicking themselves for reversing into SmartForce last year.
Since acquiring the much larger Dublin-based e-learning company - which, like its sister Irish firm Riverdeep, was founded by the former schoolteacher Mr Pat McDonagh - shares in SkillSoft have nosedived.
SkillSoft's admission that SmartForce improperly accounted for revenues has hurt the stock, despite its claims that this should not have an negative effect on its operating results.
Up to $40 million (€36.75 million) in SmartForce revenues may have been booked earlier than they should have by the firm over a three-year period. In the current climate, nervous investors do not like this type of uncertainty.
Several US law firms have already instigated class-action lawsuits against the firm, and SkillSoft's legal bills alone will cost it about $2.5 million every quarter.
On a more positive note, SkillSoft avoided delisting from the Nasdaq when it filed financial documentation with the SEC after a one-month delay. But news this week that the firm is the subject of a formal SEC investigation is likely to further hit investor confidence.
With the stock trading below $3, still way off a 52-week high of $17.20, investors may have to ride out the storm and hope the SEC clears SmartForce, and therefore SkillSoft, of any financial impropriety. Alternatively, shareholders may choose to try to make up their losses by joining one of the US class-action law suits against the firm. Most of the law firms have invited shareholders to join their actions.
