Why Mosaic, Mitel Networks, and Ambac Financial Group Slumped Today

By Dan CaplingerMarketsFool.com

Monday was a quietly positive day for the stock market, with the Dow, S&P, and Nasdaq Composite all regaining some of their lost ground from Friday's session. Concerns about the assassination of the Russian ambassador to Turkey weighed on sentiment generally, although it also had a positive impact on geopolitically sensitive areas of the market such as defense stocks. Yet even with modest gains for the market overall, some stocks missed out, and Mosaic (NYSE: MOS), Mitel Networks (NASDAQ: MITL), and Ambac Financial Group (NASDAQ: AMBC) were among the worst performers on the day. Below, we'll look more closely at these stocks to tell you why they did so poorly.

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Image source: Mosaic.

Mosaic makes a purchase

Mosaic fell 6% after the Canadian company bought the fertilizer business unit of Brazilian natural resources giant Vale (NYSE: VALE) for $2.5 billion. The purchase of Vale Fertilizantes will involve Mosaic raising $1.25 billion in cash through debt issuance, and Vale will receive 42.3 million shares of Mosaic stock as well. With that stock consideration, Vale will have an 11% stake in Mosaic, and the two companies agreed that Vale will have the right to name up to two members of Mosaic's board of directors. As Mosaic CEO Joc O'Rourke noted, "This acquisition provides Mosaic a tremendous opportunity to capitalize on the fast-growing Brazilian agricultural market and from improving business conditions." Vale stock also lost ground on Monday, but Mosaic believes that its earnings should benefit from the merger as early as 2018, with the expectations that the deal will close in late 2017.

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Mitel sells off its mobile division

Mitel Networks dropped 5% in the wake of the global cloud and mobile communications specialist's decision to sell off its mobile business. The company said that it will make the sale to Xura, receiving $350 million in cash as well as a $35 million promissory note and an equity interest in the purchaser. Mitel CEO Rich McBee said that the move will "enable us to intensify our focus and capital in expanding our leadership position in the enterprise market as it prepares for large scale digital transformation of premise-based systems to the cloud." The company also said that it intends to start a stock buyback, taking advantage of decreased leverage from the cash proceeds of the sale for what it sees as "substantially undervalued" shares.

Ambac gets a downgrade

Finally, Ambac Financial Group took a 15% hit. The bond and mortgage-backed security insurance specialist received a downgrade from analysts at MKM Partners, which cut their rating on the stock from neutral to sell and slashed their price target from $27 to $10 per share. The analysis centered on whether Ambac's book value is reflective of the company's actual value, and MKM seemed skeptical that Ambac didn't deserve a much larger discount to book value than the market is currently giving it. In light of other competitors seeing somewhat wider book value discounts, MKM believed that the $10 price target was appropriate. Even with today's drop, however, Ambac shares have still nearly doubled since their lowest levels early in 2016.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of Companhia Vale. 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.