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Why Simon Property Group Shares Are Sliding Today

By Chris Neiger – Updated Jun 10, 2020 at 1:29PM

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The company just terminated a major merger agreement.

What happened

Shares of Simon Property Group (SPG 0.70%), the biggest mall owner in the U.S., were falling today after the company said that it is terminating a $3.6 billion deal to merge with Taubman Centers (TCO). Simon's stock was down by as much as 9.9% by midday. 

As of 12:39 p.m. EDT on Wednesday, the company's shares had slid 4.1%.

So what 

The coronavirus pandemic has dealt a serious blow to the U.S. retail industry, and Simon Property said that Taubman has suffered a "material adverse event" because of it. The company laid out two reasons it's terminating the merger, with the first being the impact of COVID-19 has had a "disproportionate effect" on Taubman.

A red and green line graph on a dark background.

Image source: Getty Images.

Additionally, Simon thinks Taubman has "breached its obligations" and that the company "has failed to take steps to mitigate the impact of the pandemic as others in the industry have, including by not making essential cuts in operating expenses and capital expenditures."

Some Simon Property investors didn't like hearing this news today and began selling off some of the company's stock. 

Now what 

Right now is a very uncertain time for nearly every industry, but especially for retailers. While states are opening back up, many are restricting the number of people who can be in stores at the same time. Additionally, with millions of Americans now out of work, people aren't spending money in malls and retail stores like they were before the pandemic. All of which means that a new deal between Simon Property and Taubman seems unlikely.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Simon Property Group, Inc. Stock Quote
Simon Property Group, Inc.
SPG
$89.75 (0.70%) $0.62
Taubman Centers, Inc. Stock Quote
Taubman Centers, Inc.
TCO

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