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Why CVR Energy Stock Dropped 20% at the Open Today

By Reuben Gregg Brewer - Jun 11, 2021 at 11:06AM

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A corporate action created a complicated price move in the stock.

What happened

Shares of CVR Energy (CVI 0.09%) fell a quick 20% or so at the open of trading on Friday compared to the closing price on Thursday. That said, the stock of the diversified holding company, with interests in energy refining and fertilizer businesses, may actually be shown as slightly increasing in value by some quote services. The problem is the timing and impact of a one-time corporate action.

So what

Automated systems like stock quotes handle normal events very well, but when something that's a bit outside the box comes up, the results that end users see can get confusing. CVR Energy's stock price is a real-world example of this. In May, CVR announced plans to make a special distribution of cash and stock related to its investment in Delek US Holdings (DK -0.79%). There's really no way to plan ahead for something like this as it is a unique, company-specific event.  

Two perplexed people looking at paperwork with a calculator.

Image source: Getty Images.

That distribution took effect after the close on Thursday. Each shareholder of CVR Energy is receiving 0.1048 shares of Delek and $2.40 in cash. Stock prices end up getting adjusted to account for one-time events like this, which means that the price at the end of trading on Thursday is actually different from the price at the start of trading on Friday. And that difference is, as you would expect, the value of the special dividend. That's a simplification, of course, but it provides the general direction here and helps explain why you might be seeing different numbers for the stock's performance.

Essentially, if you look at today's price action compared to the closing price from yesterday, the stock is down materially. However, if you look at the opening price adjusted for the special dividend, the stock actually looks like it has increased a little bit.   

Now what

CVR Energy's special dividend has multiple implications. Most important for shareholders is the Delek stock distribution and cash payment. In effect, the value of what shareholders own hasn't really fallen by 20%, it's now just spread out over three pieces (CVR Energy stock, Delek stock, and cash). But because this event breaks the normal mold for stock price action, it can complicate things for stock quote services.

This is why you should always look a little deeper when you see material price swings in your holdings; such moves might not be as simple as you think.

Reuben Gregg Brewer 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

CVR Energy, Inc. Stock Quote
CVR Energy, Inc.
CVI
$32.61 (0.09%) $0.03
Delek US Holdings, Inc. Stock Quote
Delek US Holdings, Inc.
DK
$28.79 (-0.79%) $0.23

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

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