Why bebe stores, Tower Group International, and Rayonier Hit New Lows Today

These three stocks fell below their worst levels of the year Monday. Find out why.

Jun 30, 2014 at 7:42PM
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Stocks held up reasonably well on Monday, with Nasdaq managing to gain slightly even as the S&P 500 and Dow Jones Industrials eased lower. All in all, the number of stocks hitting new yearly highs greatly outnumbered those reaching new lows for the year. But there were still a few stocks plumbing new depths, and among them were bebe stores (NASDAQ:BEBE), Tower Group International (NASDAQ:TWGP), and Rayonier (NYSE:RYN).

Bebe

For bebe stores, today's 3% decline came after the retailer said after the market's close on Friday that it would abandon its lower-scale 2b concept, closing its 16 remaining stores in the 2b chain and focusing instead on trying to improve results at its namesake bebe business. As part of a broader restructuring, bebe stores will reduce its employee count in order to cut costs more generally, with 9% of the company's non-store corporate and field management staff expected to be affected by the move. Interim CEO Jim Wiggett hopes that the dual moves will put bebe in a better position financially to handle a tough retail environment, but extensive competition in the retail space will force bebe to work hard in order to convince investors that the stock's 50% plunge just since April represents a buying opportunity rather than a value trap.

Tower Group International fell another 11%, bringing its total losses over the past year to roughly more than 90%. The insurance and reinsurance specialist has been under pressure financially for a long time, and even though the company agreed to an acquisition from ACP Re at $2.50 per share, shareholders are worried that the proposed deal won't come to fruition. One concern that some have is that an "insolvency event" as defined under the parties' merger agreement might give ACP an out to cancel the deal or negotiate another price reduction. Meanwhile, regulators are scrutinizing Tower Group's business to ensure that policyholders are protected, and their actions only complicate the volatile situation.

Lumber Sean Mack
Image source: Sean Mack.

Rayonier's share price plunged about 27% from Friday's levels, but investors shouldn't panic about the move. The timber company's plan to spin off shares of Rayonier Advanced Materials was completed today, and so the share price going forward now reflects Rayonier's remaining core business after the spinoff. Long-time shareholders will receive one share of Rayonier Advanced Materials for every three Rayonier shares they owned before the spinoff, and the new company will contain Rayonier's performance-fibers business while Rayonier holds onto its forest resources and real-estate businesses. Rayonier did get downgraded today, but the real economic impact for shareholders was far less than the big share-price drop would suggest.

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