Why United States Steel Stock Dropped 8.5% Today
It's been a couple of days of mixed news for shareholders of United States Steel (NYSE: X). On Tuesday, the steelmaker announced that it will invest $700 million to acquire a 49.9% stake in Big River, a privately held scrap recycler and steel producer, with an option to acquire the remaining 50.1%. BMO Capital Markets called Big River a "low operating-cost, growth asset" that will give U.S. Steel exposure to cutting-edge electric arc production technology.
Today, we got the opposing view: Noting that U.S. Steel will fund the purchase with "100% debt," Standard & Poor's warned that such a move "could stretch adjusted debt leverage above our threshold for a downgrade during 2019 or 2020 if market conditions remain weak." Accordingly, S&P revised its outlook for the company's debt to negative -- indicating a downgraded credit rating could be forthcoming.
Investors responded by selling off the stock, and it was down 8.5% as of 3:05 p.m. EDT.
Source Fool.com
