Why BioScrip Stock Popped and Then Dropped Today

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What happened

Shares of the home infusion services giant BioScrip (NASDAQ: BIOS) jumped by almost 40% in premarket trading today. Once the market opened, however, the company's stock abruptly reversed course, dropping by more than 30% at its lowest point in early-morning trading.

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BioScrip's shares have remained under pressure as the day's trading session has unfolded, with its stock falling by 30.3% as of 1:48 p.m. EDT.

So what

What's causing investors to hit the exits? BioScrip released two major business updates prior to market open this morning:

  • BioScrip announced its fourth-quarter results ahead of the bell. The company missed Wall Street's revenue consensus estimate for the quarter by $4.8 million, and it posted an unsightly $15.4 million net loss for the three-month period.
  • In a separate press release, BioScrip also announced that it had agreed to merge with Option Care Enterprises via an all-share transaction. To complete the merger, BioScrip will dole out new shares to Option Care's shareholders -- a group of investment funds associated with Madison Dearborn Partners and Walgreens Boots Alliance (NASDAQ: WBA). Once the transaction closes, Madison Dearborn Partners and Walgreens Boots Alliance will reportedly own 80% of the combined entity, with BioScrip's shareholders owning the remaining 20%.

Based on the stock's rise and fall, investors clearly aren't thrilled with either of these developments.

Now what

Is this dip a buying opportunity? That's a tough question to answer right now. The combined company should result in a leaner, more efficient operation. At the same time, mergers like this one can take awhile to hammer out the kinks. So while the backing of a major player like Walgreens is a reassuring sign, investors may still want to take a cautious approach with this struggling home infusion services company for the time being.

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George Budwell 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.