The stock market saw considerable volatility on Tuesday morning, initially giving up ground on renewed fears about the global spread of the COVID-19 outbreak. Stocks briefly bounced higher after the Federal Reserve announced that it would cut interest rates by half a percentage point in an unusual move between meetings of the Federal Open Market Committee, showing that central banks remain on guard to support the economy in the face of potential disruptions related to the coronavirus.
Yet market participants quickly lost confidence in the move, and by 11:30 a.m. EST, the Dow Jones Industrial Average (DJINDICES:^DJI) was down 477 points to 26,227. The S&P 500 (SNPINDEX:^GSPC) had fallen 58 points to 3,032, and the Nasdaq Composite (NASDAQINDEX:^IXIC) had dropped 133 points to 8,820.
Earnings season has largely ended, but news continued to trickle in from the cannabis sector, as Tilray (NASDAQ:TLRY) gave its latest reading on conditions among marijuana stocks. Meanwhile, Thermo Fisher Scientific (NYSE:TMO) took advantage of big declines in stock markets to announce a strategic acquisition that could have major implications for its growth.
Tilray sees red
Shares of Tilray fell 12% to hit an all-time low following the release of its fourth-quarter financial report. The company failed to satisfy investors, calling into question the entire pathway to profitability for the cannabis company.
Tilray's financial results were mixed. The company reported the same kind of revenue growth that cannabis investors have come to expect, with fourth-quarter revenue tripling from year-earlier levels. But it posted a net loss seven times larger than its loss from last year's fourth quarter, due in part to impairment charges tied to its revenue-sharing arrangement with footwear specialist Authentic Brands Group.
Moreover, Tilray has had to resort to expensive financing in order to support its ongoing losses. The cannabis grower announced a senior credit facility with a two-year term bearing an interest rate 8 full percentage points higher than the prime rate. Tilray did still have $97 million in cash as of the end of 2019, but it could take more spending to pursue growth opportunities.
Executives remain optimistic, but shareholders don't seem so sure. With the stock having lost 95% of its value from its peak shortly after its 2018 IPO, Tilray no longer has investors feeling confident about what's coming down the road.
Thermo shows the rumors were true
Elsewhere, shares of Thermo Fisher Scientific jumped 6%. The company announced a long-rumored major purchase of an industry peer, opening a new pathway to potential growth.
Thermo Fisher said Tuesday that it would buy medical technology company specialist Qiagen (NYSE:QGEN) in an $11.5 billion acquisition. Under the terms of the deal, Thermo Fisher will assume $1.4 billion in net debt from Qiagen, and Qiagen shareholders will receive 39 euros per share in cash, worth roughly $43.60 per share at current exchange rates. Qiagen shares jumped 15% on the news.
Thermo Fisher pointed to the complementary nature of the two businesses, with the hope that Qiagen's life science and molecular diagnostic solutions will help add to Thermo Fisher's broader set of diagnostic offerings. From a geographical standpoint as well, the two companies will be able to benefit from cross-selling each other's existing portfolios of products. Cost savings from synergies should amount to roughly $200 million annually within a few years of the deal's closing.
Consolidation in the healthcare industry has ramped up lately, and Thermo Fisher has found a nice fit in Qiagen. Investors will have to wait and see whether the two companies can get the necessary approvals, but with Thermo Fisher hoping to close the deal in the first half of 2021, shareholders of both stocks seem excited by the possibilities.