Why Intrepid Potash Stock Dropped 19% on Wednesday
A hill made of potash. But what is it worth? Image source: Getty Images.
What happened
Shares of Intrepid Potash, Inc. (NYSE: IPI) plunged more than 19% in early Wednesday trading and remained off by about 18.1% as of 2 p.m. EST.
So what
No immediate news items have appeared to explain the sell-off, but there may be a hint as to what's going on, if you glance back a couple weeks. Two weeks ago, Intrepid Potash announced that it had engaged investment banker Cantor Fitzgerald to help it explore "strategic alternatives" to boost its business.
As the company explained, such alternatives might include but are not limited to:
- "continuing its current operating plan" (i.e., doing nothing)
- "equity offerings or balance sheet restructurings" (which could be either good or bad news)
- "merger and acquisition opportunities" (probably bad)
- "partnership or joint venture opportunities, entering into new or complementary businesses" (your guess is as good as theirs)
- "a sale of Intrepid or some or all of Intrepid`s assets" (Hurray! Cue 14% rise in stock price.)
But now, all of a sudden, Intrepid Potash stock is selling off. What might this mean?
Now what
The most obvious conclusion is that someone has heard something that suggests that Intrepid Potash will not in fact sell itself for a price justifying the 14% gain in share price that followed the company's Dec. 15 announcement. In fact, given that Intrepid Potash stock has now collapsed to almost precisely the same price it held before the rumors of a possible sale began, I'd say that explanation is most likely.
Granted, this can't come as a complete surprise. Management itself warned investors that "there can be no assurance that this evaluation will result in any transaction." But, hey, investors paid their money on Dec. 15. They took their chances. No one ever promised that the best would pay off.
Lesson learned.
10 stocks we like better than Intrepid Potash When 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 Intrepid Potash 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 Nov. 7, 2016
Fool contributorRich Smithdoes not own shares of, nor is he short, any company named above. You can find him onMotley Fool CAPS, publicly pontificating under the handleTMFDitty, where he currently ranks No. 346 out of more than 75,000 rated members.
The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.