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Why Shares of BMW AG Dropped Over 10% on Friday

The British vote to leave the European Union could make things complicated for BMW's U.K.-based Mini and Rolls-Royce brands. Shown is BMW's Mini factory in Oxford. Image source: BMW.

What: Shares of German luxury-car maker BMW (NASDAQOTH: BAMXF) were hit hard on Friday. As of 11:30 a.m. EDT, the company's American depositary receipts were down 10.24%, to $76.30.

So what: Concerns over the British vote to leave the European Union hit many stocks hard on Friday. But BMW was hit harder than some rivals for a couple of reasons.

First, BMW owns the Mini and Rolls-Royce car brands, both of which do their manufacturing in the United Kingdom. Simply put, Brexit could complicate the export of those vehicles to the rest of the Eurozone, as well BMW's ability to import parts for those cars from the European mainland.

Second, Britain is a significant market for BMW -- and obviously, the rest of Europe is a hugely important territory for the German automaker. The potential for trade barriers between Europe and the U.K. are only one concern. Another: A significant recession in Europe now looks more likely than it did a day ago. That could hit BMW's bottom line hard at a moment when it's scrambling to ramp up spending on advanced technology in order to keep pace with global luxury-car rivals.

Now what: As with most of the stocks hit hard on Friday, the real story is uncertainty: Investors see risk arising from Brexit, but right now it's vague and hard to quantify. It may be a while before we clearly understand the real risks to BMW's balance sheet and bottom line. In the meantime, I urge BMW investors to heed my colleague Morgan Housel's advice and sit tight for now .

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John Rosevear has no position in any stocks mentioned. The Motley Fool recommends BMW. 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 .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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