July 9, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Luminex (Nasdaq: LMNX ) fell as much as 18% today after the company announced an acquisition.
So what: Luminex announced today it is acquiring the privately held GenturaDx, a company that makes products related to nucleic acid testing. The company will be acquired for $50 million in cash and is expected to add $6 million in expenses this year, making it dilutive for the year.
Now what: The response from the market was harsh as more than $150 million was slashed from the company's market cap. This response was likely due to the fact that Luminex ended the first quarter with just $52.8 million in cash and $41.1 million in short-term investments, so this will eat up much of the slack on the balance sheet. Investors may be concerned that the increased cash burn will result in a dilutive stock offering in the future unless operating cash flow increases dramatically from about breakeven in the first quarter.
I don't see the purchase alone as a great reason to buy Luminex today and would wait to see how second-quarter results end up before assessing whether the company will soon be in need of more cash.
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