Why Renewable Energy Group Inc.'s Shares Plunged Today

Why Renewable Energy Group Inc.'s Shares Plunged Today

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 Renewable Energy Group Inc. dropped 10.5% today after the company announced an acquisition.

So what: The company is buying LS9, a developer of renewable chemical technology, for $61.5 million. The deal will pay $15.3 million in cash, 2.2 million shares of Renewable Energy Group stock, and the potential for another $21.5 million in cash and/or shares if certain milestones are achieved.

Now what: There's a lot of uncertainty in acquiring a company with little-known impact on earnings, especially in the new markets LS9 is targeting like detergent and personal care. It's possible that this ends up being a brilliant acquisition if the technology can be turned into profitable products, but we're probably years from that. I don't think this fundamentally changes the investment thesis for Renewable Energy Group and actually gives new upside, which is great for investors wanting to buy at today's discounted price.

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The article Why Renewable Energy Group Inc.'s Shares Plunged Today originally appeared on Fool.com.

Fool contributor Travis Hoium has no position in any stocks mentioned, and neither does The Motley Fool. 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.

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