Education provider Navitas has been punished by investors, losing more than a third of its market value after the loss of one of its most lucrative contracts.
The plunge was sparked by Sydney's Macquarie University's announcement that from 2016 it would end its 18-year agreement with Navitas and take its bridging school in-house.
The program prepares international and domestic students who have not qualified for tertiary study, representing three quarters of the company's earnings.
Navitas's stock fell $2.18, or 31 per cent, to $4.86, wiping $820 million from a market capitalisation of $2.65 billion at the market opening.
A month ago the share price hit a record $7.81.
The dramatic reaction was blamed on investor fears that other universities would follow Macquarie's lead and go in-house and the fact that the share price was significantly over-priced.
Navitas tried to allay fears, saying the pathway program was successful and it still had 32 colleges across eight countries.
However it said it would take a $40 million write-down due to the contract loss.
Navitas chief executive Rod Jones said he was disappointed by Macquarie's action, without mentioning the earnings impact which one analyst estimated at about $27 million.
Wednesday's price fall wiped nearly $100 million from the company founder's 12 per cent stake.
"(It) will likely result in a one off decline in growth in university programs earnings which will impact the second half of FY16 and the first half of FY17," Mr Jones said.
The share price had been trading well above brokers' targets of slightly above and below $5 for nearly 18 months.
Morningstar analyst Peter Rae said the market had been too excited about the prospects of growth in its pathway courses, without considering risks such as Macquarie running its own courses.
"We published a report a couple of months ago warning that any missteps would be treated harshly," he told AAP.
The company's success is strongly linked to international student numbers, with education Australia's third-biggest export.
He said it was positive that Navitas had indicated new contract talks with the University of Massachusetts in the US and WA's Curtin University were going well.
Mr Jones reaffirmed growth in full year earnings before interest, tax, depreciation and amortisation from $130 million last year to $138 million-$148 million.
Share
