Why Old Republic's Shares Plunged


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 multiline insurer Old Republic (NYS: ORI) were getting hammered by investors today, falling as much as 12% in intraday trading.

So what: Investors in Old Republic had been excited about the idea of a spinoff of its Republic Financial Indemnity Group. That group was the unprofitable segment that backed consumer and mortgage loans and got ravaged during the financial and housing meltdown. But it wasn't to be. In a press release on Friday, the company announced that it's cancelling the spinoff, stating cryptically, "These decisions respond to objections raised by certain stakeholders that RFIG's separation from Old Republic would be disadvantageous to their interests and expectations."

Now what: The bad news is clear here: Investors wanted to see Old Republic move forward, free of its mortgage-insurance ball and chain, and that hope is now gone. On the other hand, the stock of the new entity was going to be spun off to Old Republic shareholders anyway, so in theory at least, either way shareholders ended up with the downside from RFIG.

Old Republic scheduled a conference call for tomorrow to discuss the move, so shareholders may get some more clarity out of that.

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The article Why Old Republic's Shares Plunged originally appeared on Fool.com.

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