Please ensure Javascript is enabled for purposes of website accessibility

Why Pacific Biosciences of California Stock Is Sinking Today

By Keith Speights - Oct 24, 2019 at 12:13PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

News that the U.K. could scuttle its merger with Illumina has investors worried.

What happened

Shares of Pacific Biosciences of California (PACB 3.25%) are falling today, down 11.5% as of 11:46 a.m. EDT, after the Competition and Markets Authority (CMA) in the United Kingdom announced a provisional decision that the proposed merger between Illumina (ILMN 0.06%) and PacBio would "result in a significant loss of competition" in the next-generation gene sequencing market.

So what

The U.K. CMA's provisional decision wasn't a shock. Earlier this year, the agency launched an investigation of the Illumina-PacBio merger

Businessman holding wood block with "No Deal" printed on it

Image source: Getty Images.

Based on the CMA's announcement, it appears that the primary concern is that Illumina could be eliminating competition for itself with the buyout of PacBio. The CMA stated that its "investigation has found that PacBio is one of Illumina's closest competitors and vice versa" and that PacBio's new technology could position it "to be a stronger competitor in the future." What the CMA didn't say was that the U.K. is home to Oxford Nanopore, another competitor in the gene-sequencing market that could be affected even more by Illumina acquiring PacBio.

PacBio's shares have soared based on the planned merger with Illumina. It's definitely bad news for the company if the deal has to be scrapped. PacBio remains unprofitable and will almost certainly soon need to raise additional cash to fund operations if it isn't acquired by Illumina.

Now what

Illumina and PacBio have until Nov. 14, 2019, to respond to the CMA's provisional decision. Investors should learn more about what might happen next when Illumina hosts its third-quarter conference call after the market closes today. If the deal does fall through, investors will need to go back to evaluating PacBio as a growth stock on its own merits rather than as a potential part of a much bigger company. 

Keith Speights owns shares of Illumina. The Motley Fool owns shares of and recommends Illumina. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Pacific Biosciences of California, Inc. Stock Quote
Pacific Biosciences of California, Inc.
PACB
$7.94 (3.25%) $0.25
Illumina, Inc. Stock Quote
Illumina, Inc.
ILMN
$227.44 (0.06%) $0.14

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
390%
 
S&P 500 Returns
125%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/11/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.