The stock market was largely flat Monday morning, but American Equity Investment Life Holding (NYSE: AEL) was a big exception. As of 11:45 a.m. EDT, shares of the annuity provider and life insurer were down by 19%.
American Equity's plunge was caused by the announcement of a partnership with Brookfield Asset Management (NYSE: BAM), where Brookfield agreed to reinsure $10 billion of American Equity's liabilities and also agreed to make a large equity investment (a 19.9% stake) at a substantial premium to the company's recent stock price.
Image source: Getty Images.
Normally, you might expect news like this to make a stock soar. After all, Brookfield just committed to buy shares of American Equity for $37 -- a 15% premium to the stock's price before today's meltdown.
However, the stock dropped because American Equity had received a takeover offer at $36 per share in early September from MassMutual and Athene, which has now been officially rejected.
The main reason for today's downward move is that American Equity shareholders were likely banking on a takeover (and therefore a quick payday) of the insurance company. While today's partnership announcement is a good thing for American Equity's business -- and it is certainly reassuring that Brookfield is willing to pay so much for a stake in the company -- it wasn't the quick windfall that shareholders had apparently been hoping for.
10 stocks we like better than Brookfield Asset Management
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Brookfield Asset Management wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of September 24, 2020
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.