Taubman Centers' Awful Q3 Results Add Risk for Shareholders

Shares of Taubman Centers (NYSE: TCO) surged earlier this year after the mall owner announced a deal to sell all of its publicly traded stock to Simon Property Group (NYSE: SPG) at a big premium. However, since March, the COVID-19 pandemic has decimated the mall sector, leading Simon to attempt to cancel the deal. The two sides are now embroiled in litigation about whether Simon Property Group has the right to back out. A trial might begin as soon as next week.

In this context, Taubman's weak third-quarter earnings report released Monday afternoon was awful news for the mall REIT's shareholders. The poor results highlight how far Taubman stock might plunge if the buyout deal falls through and increase the risk that Simon will prevail.

Three months ago, Taubman reported terrible second-quarter results as the COVID-19 pandemic forced malls to close temporarily, sparking a slew of tenant bankruptcies and store closures. Comparable net operating income (NOI) fell 25.5% year over year in Q2, excluding lease termination income. Total NOI fell even faster, plunging 30.8% year over year (again excluding lease termination income).

Source Fool.com