Rite Aid (NYSE:RAD) Remains a Stinker Despite a Potential Deal with Walgreens

How do you know an investment is terrible? If a miraculous event needed to occur for your company of choice to remain a going concern actually does occur, and yet it still trips up, you have a terrible investment!

That's how I feel about Rite Aid (NYSE:RAD). My InvestorPlace colleague, Brett Kenwell, was featured today on Yahoo's front page, detailing the ongoing drama between RAD and its potential suitor, Walgreens Boots Alliance (NASDAQ:WBA). He wrote: "As doubts lingered about whether the Federal Trade Commission would approve the deal, RAD stock continued to sink to new lows. After what felt like a lifetime, reports finally began coming out at rapid fire."

Continuing, Kenwell laid out the details:

Some said the FTC was going to file a lawsuit to block the merger. A few days later, another said it was likely to approve the deal. WBA management took matters into its own hands and began reworking the deal with RAD, agreeing to pay a $325 million termination fee.

Instead, Walgreens will now pay $5.175 billion in cash for 2,186 retail location, three distribution centers and inventory. Fred’s, Inc. (NASDAQ:FRED) has been cut out of the deal altogether, which allows WBA to expand its footprint. Management says it will realize more than $400 million in synergies.

Still, Rite Aid shares have a history of ignoring positive news. In June, I wrote the following for InvestorPlace:

I also don’t trust the markets’ implied assessment. Well prior to me jumping into this mess — and I’ll freely admit I’m a “Johnny-come-lately” — the bulls were trumpeting RAD stock. They were flat-out wrong. When some doubled down on their optimism, they became disastrously wrong.

Needless to say, I’m in no mood to entertain market interpretations on Rite Aid. Instead, I’ll just go with common sense, and assume the worst-case scenario.

Bottom line, look for RAD stock to jump off the announcement, but just know that I won't be jumping in anytime soon!