Personal Finance

Why Shares of Perrigo Are Plunging Today

Hands with pen and calculator in front of computer monitor and laptop

What happened

After the company revealed that it might owe a sizable amount in back taxes, shares of Perrigo (NYSE: PRGO) , a maker of consumer goods and over-the-counter pharmaceutical products , dropped 21% as of 10:25 a.m. EST on Friday.

So what

Perrigo revealed in a Securities and Exchange Commission filing today that it has been notified by the Irish government that it owes 1.64 billion euros ($1.87 billion) in back taxes.

Ireland is making this claim because Elan Pharma -- which was acquired by Perrigo in 2013 -- only paid a 12.5% tax rate when it sold its multiple sclerosis drug Tysabri to Biogen (NASDAQ: BIIB) . The government stated that the rate should have been 33%.

Perrigo states that it "strongly disagrees with this assessment" and plans to fight back.

Management also noted that it won't have to make any payments for several years even if it loses the case.

Traders are mauling Perrigo's stock in response to the uncertainty.

Hands with pen and calculator in front of computer monitor and laptop

Image source: Getty Images.

Now what

Perrigo's market cap was about $7 billion as of Thursday, so $1.9 billion in back taxes is a huge number. In fact, Perrigo's market cap has declined by about $1.5 billion today in response to this news. That number is awfully close to the company's potential tax liability, which suggests that Wall Street doesn't have a lot of faith in management's ability to sidestep the payment.

Perrigo's management team is scheduled to present at the upcoming J.P. Morgan Healthcare Conference on Jan. 8, 2019. Investors might want to tune in to get the latest information on this important situation.

10 stocks we like better than Perrigo

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 quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Perrigo wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 14, 2018

Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Biogen. 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.

In This Story

BIIB JPM PRGO

Other Topics

Stocks

Latest Personal Finance Videos

    #TradeTalks: The Changing E-Commerce Landscape

    e-Commerce Consultant James Thomson joins Jill Malandrino on Nasdaq #TradeTalks to discuss the changing e-commerce landscape, what consumers should prepare for as we head into shopping season and why you shouldn’t do last minute shipping.

    3 days ago

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More