Cogent Declines After Megaupload.com Is Shut: Washington Mover

Cogent Communications Group Inc. (CCOI), the Washington-based Internet-service provider, fell the most in more than three years after customer Megaupload.com was shut by U.S. authorities during a copyright-infringement investigation.

Cogent dropped 19 percent to $15.30 at the close in New York, the biggest plunge since December 2008. The stock has lost 9.4 percent this year after gaining 19 percent in 2011.

The company provided Megaupload with leased computers, Internet bandwidth, hosting, and support services, according to an indictment of the Hong Kong-based file-sharing site. Megaupload transferred $30 million to a Cogent bank account from February 2009 to last July, according to the indictment.

The FBI searched Cogent’s headquarters, according to a note by David Dixon, an analyst at FBR Capital Markets, who cited a Wall Street Journal report and talks with Cogent. The company may lose revenue and Cogent competitors such as Level 3 Communications Inc. (LVLT) and its Global Crossing unit may also be at risk from shutdowns of file-sharing or cyberlocker sites, according to the analyst.

“It remains unclear how many other similar file-sharing sites may be at risk and the additional bandwidth related revenue exposure for companies such as Cogent, Level 3 and Global Crossing,” Dixon wrote in the note today.

Travis Wachter, Cogent’s marketing communications manager, didn’t respond to calls and an e-mail seeking comment.

“MegaUpload is not a customer of Level 3. Online file- sharing customers represent a very small part of Level 3’s diverse global customer base,” said Mark Taylor, vice president of Content and Media for Level 3 Communications. Level 3 acquired Global Crossing in October.

To contact the reporter on this story: Alexander Yablon in New York at ayablon@bloomberg.net

To contact the editor responsible for this story: Ville Heiskanen at vheiskanen@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.