Why Axalta Coating Systems Ltd's Shares Plunged 22% Today

What happened

Shares of Axalta Coating Systems Ltd (NYSE: AXTA) plunged as much as 22% in trading Thursday after rejecting a buyout offer from Nippon Paint. Shares were down 16.2% at 3:05 p.m. EST Thursday and showed no signs of recovery late in the day.

So what

According to Reuters, the latest offer from Nippon Paint was for $37 per share in cash, a price Axalta's management didn't think was enough to complete a buyout. The bid would have valued the company at $9.1 billion.

Axalta has now rejected offers from Nippon and Akzo Nobel over the terms the company offered. Management is clearly confident they can create more value as an independent company, but that's not playing out on the market Thursday.

Now what

Given Wednesday's closing price of $37.55 per share, the market was obviously expecting a buyout at a higher price than the $37 that was reportedly on the table. The move was a reversal of Axalta's pop earlier this fall when buyout talks began. This shows why it can be dangerous buying a stock on buyout speculation, especially in a company that seem to be making a habit of fighting off potential mergers.

10 stocks we like better than Axalta Coating SystemsWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Axalta Coating Systems wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 6, 2017

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.