Why Shares of West Corp. Dropped Today

By Timothy GreenMarketsFool.com

What happened

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Shares of telecommunications services provider West Corp. (NASDAQ: WSTC) slumped on Tuesday after Reuters reported that Apollo Global Management (NYSE: APO) was aiming to convince the company to accept a $2 billion acquisition offer, below the market capitalization as of market close on Monday. At 1:20 p.m. EDT, West Corp. stock was down about 10%.

So what

Reuters reported last week that Apollo Global had prevailed in an auction for West Corp. and was currently in advanced talks to buy the company. Shares of West Corp. shot up on that news, pushing its market capitalization close to $2.3 billion.

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Image source: West Corp.

Apollo is reportedly trying to convince West Corp. to accept a bid of just $2 billion, roughly where the market capitalization now stands following Tuesday's slump. One likely sticking point in the negotiations is West Corp.'s $3 billion of debt. Interest from that debt ate up one-third of West Corp.'s operating income in 2016.

While the talks are nearing their conclusion, there's no guarantee that a deal will ultimately be struck. If the deal falls through, shares of West Corp. would likely fall even further.

Now what

West Corp. expects to have a decision by May 9, the date of its first-quarter earnings report, according to Reuters' sources. Neither West Corp. nor Apollo Global have commented on the negotiations. The good news for investors is that they won't have to wait long. The bad news is that the acquisition price may be disappointing.

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Timothy Green 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.