Candle maker Blyth Inc's (BTH.N) shares fell as much as 22 percent after its ViSalus unit withdrew its planned IPO, a little over a month after filing to go public.
Nutritional supplements seller ViSalus Inc, in which Blyth owns a 73 percent stake, filed in August to raise up to $175 million in an initial public offering.
It planned to use the proceeds to pay a special dividend to pre-offering shareholders including Blythe, which sells candles and home fragrance products under the PartyLite brand.
"We felt that the valuation we were getting was no where near what we believe the value of the company is," Blyth Chief Financial Officer Robert Barghaus said on a conference call with analysts.
The stock, which touched a four-year high of $46.07 on August 16 when the ViSalus offering was announced, was down 20.1 percent at $25.91 in afternoon trading on the New York Stock Exchange on Wednesday.
"A special dividend is always a red flag ... All that it does is, generally, increase debt," said Scott Sweet, managing partner at IPO Boutique.
Institutions are not attracted to multi-level marketing companies and that could also be a reason the company did not get a desired valuation, Francis Gaskins, editor of IPOdesktop.com, told Reuters.
ViSalus, founded in 2005, sells weight management products, nutritional supplements and energy drinks in the United States through independent distributors. It earned $24.5 million in the six months ended June 30 on net sales of $327.3 million.
"The current IPO market place does not appear willing to recognize the strength of this story however," Chief Executive Robert Goergen said, noting that ViSalus's net sales increased more than 450 percent in the first half of 2012.
ViSalus, which had about 1.26 million customers at the end of June, markets its products through the Body by Vi 90-Day Challenge marketing campaign, which encourages customers to lose weight over a 90-day period.
The ViSalus IPO withdrawal is the second set back to Blythe in less than a week after Moody's cut its outlook on the company to 'negative' last Thursday.
Since Moody's action, shares of the company have lost more than a third of their value.
(Reporting by Aman Shah in Bangalore; Editing by Supriya Kurane and Saumyadeb Chakrabarty)