EMI, the embattled music group behind Corinne Bailey Rae and Lily Allen, could fall to a bid of less than the 320p it rejected last summer, after issuing its second profit warning in just over a month.

The company blamed a 20 per cent collapse in CD sales in the United States, which will cause a 15 per cent shortfall in recorded music sales. However, industry insiders accused the company of “overshipping” to retailers.

The latest problems — less than five weeks after a profit warning based on poor preChristmas sales — frustrated investors at a time when the company is being tracked by private equity suitors.

EMI said that the weak US market, which was down 9 per cent overall, led to a “high level of product returns”, although the company was trying to unload high volumes of stock.

The company shipped an estimated 1.8 million copies of Norah Jones’s Not Too Late in the US, but sales have so far reached only 629,000 in two weeks.

The shares fell 12 per cent to 210¾p and helped to push down Warner Music’s stock by 8 per cent to $17.88. Last summer, EMI and Warner tried to buy each other, with Warner’s last offer pitched at 320p, before European regulatory uncertainty ended their battle. However, the double warning has soured investor sentiment, and while no one was willing to admit to reduced price expectations on the record, the message from the City was that “in-vestor expectations of value are not sitting at 320p today”.

Tim Rees, a fund manager from EMI’s biggest shareholder, Insight, gave warning that Eric Nicoli, EMI’s chief executive, could not to be complacent. “Clearly the physical side of the music market is difficult,” he said. “That it has hit profits in such a major way is disappointing but not surprising. The management has to deliver on promises to cut costs.” Private equity is most likely to be interested in EMI, as Warner Music remains side-lined. Bankers familiar with EMI indicated that the share price fall would prompt a reassessment.

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