Why Wendy’s Stock Dropped Today

Billionaire investor Nelson Peltz’s Trian Fund Management does not intend to make a takeover bid for Wendy’s at this time, according to a report by Reuters.

The activist investor firm has a roughly 16% stake in Wendy’s. Reuters previously reported that Trian was forming an investment group to take the fast-food chain private.

Rumors of a potential acquisition helped to drive up Wendy’s share price. But today’s report that Trian has decided against a deal drove many investors to sell their shares, causing Wendy’s stock to give up much of its recent gains.

Wendy’s needs to right itself

Trian is reportedly not pleased with Wendy’s performance, nor does it feel that its stock price represents a particularly compelling opportunity — even with shares down more than 66% over the past five years.

Trian certainly has reason to be disappointed. Wendy’s global systemwide sales fell 6.5% in the second quarter, driven by a 7% decline in U.S. same-store sales. The company’s net income, in turn, plunged 41% to $55 million.

“Today we are clearly not performing at our potential,” new CEO Bob Wright said on Aug. 7. “I returned to Wendy’s because I believe we can fix our issues and I am excited to work with our team and our franchisees to drive a strong turnaround.”

With a takeover offer unlikely to emerge anytime soon, Wendy’s shareholders are now hoping that Wright can succeed in his turnaround efforts.