Temple-Inland Shares Dropped: What You Need to Know


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of paper company Temple-Inland (NYS: TIN) plunged 20% Tuesday after announcing it is being sued over its role in a failed bank it once owned, Guaranty Financial.

So what: While the lawsuit itself -- Temple is being accused of stuffing Guaranty with toxic assets before spinning it off -- doesn't seem to have a whole lot of merit, Mr. Market is probably more concerned about its possible side effects. Specifically, investors are worried that International Paper (NYS: IP) will take its standing $30.60 buyout offer off the table simply because of potential legal liability.

Now what: I wouldn't be so quick to pounce on this plunge. A Temple takeover was already somewhat of a long shot thanks to the poison pill it has in place, and today's news just makes those odds even slimmer. Without the delicious chances of a possible buyout, Temple's heavy debt load, slim margins, and highly volatile stock price don't seem worth being exposed to.

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At the time thisarticle was published Fool contributorBrian Pacamparaowns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool'sdisclosure policyalways gets a perfect score.

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