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Why CF Industries, Seaspan, and Kinross Gold Slumped Today

By Dan Caplinger - May 24, 2016 at 5:43PM

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Even though the market soared today, these stocks fell. Find out why.

Image source: Kinross Gold.

The stock market moved sharply higher on Tuesday, sending the Dow to gains of more than 210 points and boosting the S&P 500 by 1.4%. Investors reacted positively to data on new home sales, which hit their highest level in eight years and supported the idea that the U.S. economy has not only fully recovered but also has potential for further growth well into the future. The nearly 17% rise in new home sales was the biggest monthly gain since 1992, and upward revisions to past months also supported the bullish thesis in the market. Yet even though the overall market responded favorably to the positive economic news, some stocks nevertheless posted sharp declines. Among the worst performers on Tuesday were CF Industries (CF 4.20%), Seaspan (ATCO 1.37%), and Kinross Gold (KGC 2.50%).

CF Industries fell 8%, giving up all of its gains from Monday. The fertilizer company had initially climbed following a press release on Monday morning saying that it had terminated its proposed combination with certain business divisions of Netherlands-based OCI, citing changes in the formerly favorable rules governing potential tax inversion transactions. As CF Industries CEO Tony Will described, "Although the original deal created significant value for both parties, changes in the regulatory and commercial environments forced us to reevaluate the combination." CF concluded that terminating the deal was in its best interest. Yet after a gain Monday, multiple analyst downgrades pummeled the fertilizer company's stock Tuesday, and some now wonder whether CF might end up getting left behind in the wave of consolidation going through the industry recently.

Seaspan dropped 9% after announcing that it had priced an offering of its common stock. The company sold 5 million shares at $14.70 per share, which almost exactly corresponds to the closing price of the stock on Tuesday, and underwriters will likely buy an additional 750,000 shares as well. Seaspan expects to use about the roughly $85 million in proceeds to redeem some of its perpetual preferred stock. Interestingly, the company's CEO and some other entities have agreed to buy a total of $15 million more in stock directly from Seaspan, pointing to ongoing confidence from insiders that the shipping company expects better times in the near future.

Finally, Kinross Gold declined 11%. The gold miner suffered from a general drop in prices of the yellow metal on Tuesday, which helped pull the entire mining sector downward in sympathy. But Kinross in particular is also facing some labor challenges. Tuesday morning, employees at the company's Tasiast mine in Mauritania began a strike. Kinross said that it remains open to restarting negotiations on a new collective agreement and other outstanding union issues, and the company doesn't expect the strike to affect development in the Phase One expansion at Tasiast. Nevertheless, if the strike continues for a long time, then it could adversely pressure production and pull down the miner's overall financial results.

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Stocks Mentioned

Atlas Corp. Stock Quote
Atlas Corp.
$11.12 (1.37%) $0.15
Kinross Gold Corporation Stock Quote
Kinross Gold Corporation
$4.10 (2.50%) $0.10
CF Industries Holdings, Inc. Stock Quote
CF Industries Holdings, Inc.
$86.82 (4.20%) $3.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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