What Happened?

Shares of chip designer Allegro MicroSystems (NASDAQ:ALGM) fell 13.4% in the pre-market session after ON Semiconductor withdrew its proposal to acquire the company. ON Semiconductor added that there was "no actionable path forward." 

The stock likely fell as the market reassessed the potential for the company to be taken private, with the prospect for shareholders to exit their current positions at a premium in the event of a buyout appearing more unlikely.

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What The Market Is Telling Us

Allegro MicroSystems’s shares are extremely volatile and have had 36 moves greater than 5% over the last year. But moves this big are rare even for Allegro MicroSystems and indicate this news significantly impacted the market’s perception of the business.

The biggest move we wrote about over the last year was about 1 month ago when the stock gained 22.3% on the news that Bloomberg reported the company is fielding takeover interests from peer, ON Semiconductor. The sources added that there could be other bidders in the mix too. Most acquisitions close at a premium, raising the possibility that existing investors could exit their positions at a higher price if Allegro sealed a deal with a buyer.

Allegro MicroSystems is down 15.9% since the beginning of the year, and at $19.18 per share, it is trading 42.1% below its 52-week high of $33.15 from July 2024. Investors who bought $1,000 worth of Allegro MicroSystems’s shares at the IPO in October 2020 would now be looking at an investment worth $1,084.

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