Why Renewable Energy Group Inc.'s Shares Plunged Today

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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