Shares in Olympics security provider G4S have fallen 9% after the firm said it faced a potential £50m loss on the contract for the Games.
Late on Friday, G4S said it faced a £35m-£50m loss on the £284m contract after failing to recruit enough security guards for the Olympics.
The government has had to draft in 3,500 troops to cover the shortfall.
There is speculation that G4S chief executive Nick Buckles could lose his job.
Chairman John Connolly has hinted that senior heads could roll.
Answering questions in Parliament, Home Secretary Theresa May denied that the government knew last year there would be a shortage of security staff, maintaining instead that G4S only warned the government of the shortfall on Wednesday 11 July.
"G4S repeatedly assured us they would overshoot their targets", she said.
But she insisted G4S "did not deceive the government".
The shadow home secretary, Yvette Cooper, said monitoring of the contract had "failed spectacularly".
It has also emerged that Greater Manchester Police has had to help out with security at an Olympic team hotel in Salford after only 17 of the 52 staff scheduled to work turned up.
G4S said in statement that security work at some venues was being "supported by police in the short-term while the private security workforce is being mobilised".
"This situation is being rectified over the coming days, which should lead to the withdrawal of police from those roles assigned to private security."
Chief executive Nick Buckles, who has already waived his bonus, is due to appear before the Commons Home Affairs Select Committee on Tuesday.
Over the weekend he admitted he was "bitterly disappointed" at his company's failure to meet the terms of the contract.
Stockbroker Seymour Pierce has removed its "buy" rating on the company and reduced its profits forecast by £60m. Other brokers have also downgraded the company.
Analysts are worried about the damage to the company's reputation that the scandal could have.
"While the likely outcome of the Olympic contract is no doubt disappointing, our biggest concern is the impact it could have on other outsourcing contracts with the UK Government, which is a sizeable (more than 20%) and growing part of its bid pipeline," said broker Panmure in a research note.