Shares of Edenred (EPA:EDEN) (EDNMY) fell sharply on Wednesday after reports of an investigation into the company’s Italian meal voucher business and the seizing of roughly €20 million ($21.7 million) worth of assets.
Commenting on the market reaction, Citi analysts said it “could be overdone.”
“Our estimate of the revenue at risk if a restriction was placed on all public tenders in Italy (~1-2%), along with seeing limited contagion outside of Italy (tender rules broken are specific to Italy), suggests that the market reaction could be overdone,” analysts said in a note.
While some investors are concerned about potential contagion, analysts think there is no risk to public sector contracts or bids in other European countries because these regulations are unique to Italy.
“However, we note that there is still uncertainty around the magnitude and severity of the resulting potential criminal action/fine,” they added.