Western Digital’s Deal With Kioxia Is Off. WDC Stock Is Sinking.

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Among the more volatile stocks in the market this year, Western Digital (NASDAQ:WDC) continues to excite investors. Shares of WDC stock sank more than 10% in today’s session. This comes on news the company has broken off talks with Kioxia over a merger deal.

Notably, this decline is down considerably from the -16% move WDC stock made earlier this morning on the news. The companies, both of whom are major players in the flash memory business, would have become a behemoth to contend with in this space. However, it appears not all investors were sold on the details of this merger.

According to today’s reports, discussions broke off after Kioxia’s second-largest shareholder, SK Hynix, said it wouldn’t support the deal. This particular shareholder didn’t believe it was receiving full value for its stake. However, some speculate that this could be a negotiating ploy and the two parties will be talking again soon.

Let’s dive into what investors should make of today’s move in Western Digital.

WDC Stock Plunges as Merger Deal Called Off

This is an interesting case for outside investors to observe, in that it’s clear that SK Hynix is feeling out the market’s response to its stance on this deal. Given the massive decline in WDC stock today, I think it’s increasingly likely we’ll see merger talks resume shortly.

It appears many in the market believe that consolidation is the most appropriate, and perhaps a necessary, outcome for players in the flash memory market. Western Digital has seen its stock price bounce around in recent years, but it’s generally moved down and to the left since peaking out in the middle of the last decade. While data usage and storage needs continue to grow exponentially, cloud storage solutions have taken over from physical memory options.

Interestingly, SK Hynix is also a competitor in the flash memory business. Therefore, the fact that this shareholder is holding out could be a strategic business move as well. We’ll have to see if things change in the days and weeks to come. But suffice it to say, WDC stock is likely to remain a volatile stock until investors have clarity on whether this merger will proceed or not.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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