Corporate inversion deals just got riskier for investors

Corrections and clarifications: An earlier version of the story misstated where Markit is based. 

Q: Is investing in inversions risky?

A: The government is clearly looking to make inversions less lucrative for companies, which was apparent this week with new Treasury Department rules. Inversions got riskier for speculators, too.

Inversions are corporate maneuvers taken by some companies looking to lower their U.S. tax bills.

In these moves, a U.S.-based company combines with another company in a country with a lower tax rate. Investors often speculate which companies could be targeted in such deals, and any merger for that matter, to look for quick gains. But the government is looking to make inversions much less easy to pull off and potentially less tax efficient.

Rules announced late Monday raise the requirements surrounding inversions. Investors immediate felt the hurt. Shares of healthcare company Allergan (AGN), which is currently amid a pending inversion with Pfizer (PFE), saw its shares drop 15% to about $235 a share Tuesday when it looked like the deal could run into trouble.

$160 billion Pfizer, Allergan inversion scrapped

IHS, which provides market data to companies, also saw its shares decline about 2%. The company plans to combine with an U.K.-based peer, Markit, in an inversion.  It’s hard to profit from a corporate move the government seems determined to squash.

USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at mkrantz@usatoday.com or on Twitter @mattkrantz.