KIT Digital said the there were repeated requests from shareholders to reduce the number of inside directors.

The company also appointed Chief Administrative Officer Barak Bar-Cohen interim chief executive, replacing Kaleil Isaza Tuzman who will continue as the chariman of the board.

"From the stock perspective, it's not the CEO stepping down or the company's hunt for a new CEO or resignation of three members of the board. It is to do with Politi's departure and, more so, with the timing of it," JMP Securities analyst Mark Harding said.

He said Politi -- one of the top ten shareholders of KIT Digital with a nearly 2 percent stake -- quit KIT Digital over differences of opinion with the management over the company's possible buyout.

However, the company denied that. "There have been no differences of opinion with Politi over the company buyout as we are not up for sale. We respect his opinion," Tuzman told Reuters.

The company, however, said it had appointed a special committee to evaluate unsolicited interests from a couple of suitors.

Tuzman also said he was looking to have a new CEO in place in the next three to six months.

The company, which has delayed its annual report, could go private or be bought out by a larger company," said analyst Harding.

KIT Digital's stock -- one of the top losers on the Nasdaq on Friday -- closed at $6.33 on Friday on Nasdaq. It fell to $5.99 earlier in the session.

(Reporting by Monika Shinghal in Bangalore; Editing by Don Sebastian)

• A Permanent Economic Emergency