Why Teekay Tankers Ltd.'s Shares Popped

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 Teekay Tankers rose 10% today after announcing jointly with Teekay that they are forming a new subsidiary.

So what: The two companies are forming Tanker Investments Ltd., which will "opportunistically acquire, operate, and sell modern second-hand tankers." The theory is that the tanker business is in a cyclical low, and when a recovery takes place, the business will take advantage by owning a fleet purchased at a discount.

Teekay Tankers and Teekay Corportation will each own 10% of the company for a $25 million investment. Part of the deal also includes the sale of four 2009-built Suezmax tankers from Teekay and the sale of Teekay's management operations business to Teekay Tankers. This business will then manage Tanker Investments' fleet for a fee.

Now what: The good news for Teekay Tankers investors is that there's upside from owning the operations business and little downside outside of the $25 million invested in the new company. I'm not convinced that the tanker business is in a cyclical low, but if it is that will provide great upside. I'm not buying until we really see a recovery in this business, because right now Teekay Tankers is still losing money and the tanker business is under a lot of pressure from declining U.S. imports.

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The article Why Teekay Tankers Ltd.'s Shares Popped originally appeared on Fool.com.

Fool contributor Travis Hoium and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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