What happened

Shares of Illumina (ILMN -0.80%), a maker of equipment for genetic testing and analysis, had crashed 10% as of 12:50 p.m. on Thursday. The company announced this morning that it has completed its $8 billion cash and stock acquisition of cancer-testing company Grail despite the fact that the European Commission (EU) is still reviewing the transaction over monopoly concerns -- a fact that sparked a statement of "regret" over Illumina's decision from the commission.  

Analysts aren't particularly pleased with this news, either. As TheFly.com reports today, Citigroup called Illumina's decision "confusing," while SVB Leerink went a step further and downgraded the stock to market perform.

Big red arrow going down over a stock chart.

Image source: Getty Images.

So what

Illumina is undeterred. As it explained in a statement, "Grail has no business in the EU, and the company believes that the European Commission does not have jurisdiction to review the merger," much less forbid it. But at the same time, the U.S. Federal Trade Commission (FTC) does have jurisdiction and is also reviewing the transaction. And Citi points out that it knows of no other precedent in which a company decided to go ahead and buy another company in the middle of an as-yet-undecided regulatory review.

SVB Leerink was even harsher in its judgment. Even assuming Illumina's acquisition is eventually approved and doesn't need to be unwound, the analyst notes that the high price Illumina is paying will cause significant share dilution for existing shareholders. On the other hand, if the acquisition is denied by the EC or the FTC, Illumina faces heavy fines by the regulator(s) for its rash action.

Now what

How big could these fines be? According to Reuters, the EC has the authority to levy fines of up to 10% of a company's "aggregate turnover," i.e., revenue. In Illumina's case, that could mean nearly $400 million.  

Perversely, though, those fines could be the least of Illumina's worries. Thanks to today's sell-off, the stock has already lost $7.5 billion in market capitalization and might not get it back until this whole mess is resolved.