Why Rite Aid, Diana Shipping, and Finisar Slumped Today

By Dan CaplingerMarketsFool.com

The stock market had a negative tone on Wednesday, although major benchmarks moved in different directions. The Dow Jones Industrials took the biggest hit, falling triple digits as one of its most influential components suffered an earnings-related drop. Relative strength in the Nasdaq Composite showed cross-currents in the overall market, but several individual stocks had substantial declines for the day, andRite Aid (NYSE: RAD), Diana Shipping (NYSE: DSX), and Finisar (NASDAQ: FNSR) were among the worst performers. Below, we'll look more closely at these stocks to tell you why they did so poorly.

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Rite Aid looks a bit ill -- again

Shares of Rite Aid dropped 9% in the wake of news that suggested that once again, the drugstore chain's planned merger with Walgreens Boots Alliance (NASDAQ: WBA) might be in danger. Already, Rite Aid investors have had to deal with a seemingly endless series of setbacks for the combination, and they've had to accept less attractive terms than Walgreens originally proposed for the deal. Yet now, some believe that the Federal Trade Commission might seek to prevent the merger from taking place, despite the two drugstore companies having said that they would sell as many as 1,200 Rite Aid stores to third-party competitor Fred's in order to preserve competition. After so many hurdles, Rite Aid investors are right to be nervous that any further problems could simply lead Walgreens to give up on the deal, and that would require a huge shift in corporate thinking for Rite Aid going forward.

Image source: Rite Aid.

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Diana raises capital

Diana Shipping stock sank 12% after the shipping company sold shares in a secondary offering in order to raise cash. The company said late Thursday that it would sell $70 million in common stock, with underwriters having rights to an additional allotment of roughly $10 million at their election. CEO Simeon Palios and various other executives and related entities said that they would purchase $20 million from the offering, but investors were still nervous about the potential dilution from the offering. Diana intends to use the proceeds from the stock sale to fund acquisition costs of additional dry bulk vessels, which it hopes will foster growth going forward. Given that past stock sales have happened at prices below market, it's logical to see Diana Shipping shareholders hedge their bets prior to the pricing of the offering.

Finisar's optics look less than perfect

Finally, shares of Finisar finished down 9%. The optical component manufacturer has gotten hit hard over the past couple of months, with problems starting after a sluggish fiscal third-quarter report in March raised questions about whether Finisar would be able to sustain the pace of growth that investors have counted on seeing. Guidance for the current quarter was also underwhelming, and now, worries that Finisar might suffer from a possible slowdown in the Chinese economy have hit the stock even further. Yet even though Finisar shares are down about 40% from their highs earlier in 2017, the stock has still doubled since late 2015, and fundamental prospects for the fiber-optic component industry remain good even if the pace of growth doesn't live up to the ambitious expectations of bulls in the business.

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