Shares of InvenSense (NYSE:INVN) took a sudden dive on Wednesday, plunging as much as 11.4% with little warning.
Unconfirmed chatter that InvenSense might lose a component supply contract with Apple (NASDAQ:AAPL) cast a shadow over the company's pending merger with Japanese electronics veteran TDK (OTC:TTDKY). Apple accounted for 40% of InvenSense's revenue in fiscal 2016, so any weakening of that crucial business relationship would clearly undermine InvenSense's value to TDK as well.
TDK wants to establish itself as a major supplier of sensor solutions, and picking up InvenSense for $1.3 billion in cash would go a long way toward that goal. It's unclear how the rumors of a fallout between Apple and InvenSense got started, and the whispers could very well turn out to be mere hearsay and gossip.
I see no reason for InvenSense investors to take this report too seriously, because the pending merger provides a comfortable buffer for any newfound risks. If nothing else, having TDK back out would probably trigger a $46.7 million termination fee, addressed straight to InvenSense. TDK owners, on the other hand, may want to keep an eye on the InvenSense/Apple connection.