The federal contractor fell about 56% after the Government Accountability Office sustained a protest of its $3.1 billion-ceiling Homeland Security award. Most of the drop came three hours before the company's statement.
By the time WidePoint told investors that a federal watchdog had ruled against it, most of the damage to its stock was done.
WidePoint, a provider of mobile device management services to government agencies, closed Thursday at $11.07. It opened Friday near $10.64 and fell to $6.83 within the first half hour. By 10:15 a.m., it was near $5.55, and by late morning it was below $5. At 12:43 p.m., the company issued a statement confirming that the Government Accountability Office had sustained a protest against its award. Shares traded near $4.86 in the afternoon, down about 56%, leaving the company with a market value of about $48 million.
The contract
In June, the Department of Homeland Security named WidePoint the single awardee of its Cellular Wireless Managed Services 3.0 contract, a 10-year agreement with one base year and nine option years and a ceiling of about $3.1 billion. A rival bidder, TurningPoint Global Solutions, filed a protest days later.
The $3.1 billion is a ceiling on an indefinite-delivery contract, not booked revenue. WidePoint had recognized no revenue from CWMS 3.0, and its quarterly filing described the award as subject to the protest, with doubt about timing and realization. Federal customers made up 85% of its revenue in the second quarter.
What a sustained protest means
In its statement, WidePoint said GAO "has notified WidePoint that it has sustained the protest," that the findings remain under seal, and that a sustained protest "does not necessarily conclude the procurement process." It said the outcome "may lead to various outcomes, including corrective actions or re-evaluations, as determined by the agency," and that it is working with DHS to understand next steps. Management had previously pointed to its record of prevailing in all three earlier protests of its CWMS and related contracts.
GAO recommendations go to the agency, which decides how to respond. That can mean reevaluating bids, reopening the competition or reaffirming the award with a fuller record.
The sequence
The company's statement came about three hours after the selling began. A headline reporting the ruling circulated shortly after 10 a.m. As of Friday afternoon, WidePoint had not filed an 8-K on the decision.
Two readings of the drop are available. In one, a sustained protest on the contract underpinning the growth story means the market must assume the award is lost until shown otherwise, especially with the reasoning sealed. In the other, the ruling sends the procurement back to DHS rather than ending it, and a stock that fell 56% on a contract it had never booked may be pricing a harsher outcome than the process requires.
The redacted public version of GAO's decision, typically released after a protective-order review, will show the grounds. DHS's choice between corrective action, reevaluation or a new competition will settle what WidePoint still has.