Why Renewable Energy Group Inc.'s Shares Plunged Today

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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 Renewable Energy Group Inc.  (NASDAQ: REGI  ) dropped 10.5% today after the company announced an acquisition.

So what: The company is buying LS9, a developer of renewable chemical technology, for $61.5 million. The deal will pay $15.3 million in cash, 2.2 million shares of Renewable Energy Group stock, and the potential for another $21.5 million in cash and/or shares if certain milestones are achieved.

Now what: There's a lot of uncertainty in acquiring a company with little-known impact on earnings, especially in the new markets LS9 is targeting like detergent and personal care. It's possible that this ends up being a brilliant acquisition if the technology can be turned into profitable products, but we're probably years from that. I don't think this fundamentally changes the investment thesis for Renewable Energy Group and actually gives new upside, which is great for investors wanting to buy at today's discounted price.

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  • Report this Comment On January 23, 2014, at 6:31 PM, duzer5 wrote:

    Well why did they plummett? Never did answer, is it more shares out. All I know is I rebought back in at 10.36. Thankful for the drop, sold late last year for a nice taxable profit and got it back for less than I paid the 1st time.

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Travis Hoium

Travis Hoium has been writing for since July 2010 and covers the solar industry, renewable energy, and gaming stocks among other things.

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