Why Shares of Luminex 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 Luminex (NAS: LMNX) fell as much as 18% today after the company announced an acquisition.
So what: Luminex announced today it is acquiring the privately held GenturaDx, a company that makes products related to nucleic acid testing. The company will be acquired for $50 million in cash and is expected to add $6 million in expenses this year, making it dilutive for the year.
Now what: The response from the market was harsh as more than $150 million was slashed from the company's market cap. This response was likely due to the fact that Luminex ended the first quarter with just $52.8 million in cash and $41.1 million in short-term investments, so this will eat up much of the slack on the balance sheet. Investors may be concerned that the increased cash burn will result in a dilutive stock offering in the future unless operating cash flow increases dramatically from about breakeven in the first quarter.
I don't see the purchase alone as a great reason to buy Luminex today and would wait to see how second-quarter results end up before assessing whether the company will soon be in need of more cash.
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At the time this article was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.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 Motley Fool has a disclosure policy.