Avon Products Inc's (AVP.N) shares fell 10 percent in their first session since smaller rival Coty Inc withdrew its $10.7 billion takeover bid for the world's largest cosmetics direct seller.
Avon's shares fell to $18.60 Tuesday morning, below their levels just before Coty first went public with its unsolicited but friendly offer to buy Avon in April.
"While Coty's bid provided a floor under Avon's stock, the withdrawal of this bid will push it to its fundamental level," BMO Capital Markets analyst Connie Maneaty wrote in a note.
Avon has been suffering from plummeting profits on declining sales at home and in some international markets, as well as a stock price that had been hammered prior to Coty's bid.
Coty last week raised its most recent bid, which had the financial backing of Warren Buffett's Berkshire Hathaway (BRKb.N) (BRKa.N) and others, and gave Avon a May 14 deadline to respond.
But the company, best known for fragrances for stars including Lady Gaga and designers such as Calvin Klein, said Avon's unwillingness to engage in direct talks led it to pull its offer.
Some analysts were critical of how Avon handled Coty's overtures.
"We are struck by Avon's continued lack of communication with Coty," Bernstein Research analyst Ali Dibadj told Reuters.
"A bid with financial backing and reasonable starting point in terms of price must be looked at in order to fulfill one's fiduciary duty to shareholders."
In a client note, Dibadj also said more stockholders had become supportive of Coty's bid, especially after Avon reported dismal first-quarter earnings this month, with profits falling 82 percent and the continuing exodus of sales representatives.
Avon, which had rejected all of Coty's earlier bids without entering into discussions, said on Sunday it would consider the offer and respond to Coty within a week.
A number of Avon shareholders had told Reuters in recent weeks that Coty's offers were too low, but they wanted Avon to at least meet with Coty.
The news leaves Avon shareholders hoping that the company can live up to its claim in rejecting Coty's earlier bids that its value can rise more from a turnaround under new Chief Executive Sheri McCoy than by being bought by Coty.
"Ultimately the value at Avon that can be unlocked, if correctly executed, should be worth over $25 per share," Victoria Collin of Atlantic Equities LLP wrote in a client report.
Even as Avon has faced criticism in some quarters for not engaging directly with Coty, it was under no obligation to do so, according to one expert.
"These tactics are par the course -- the concern is if you make a response, are you setting the stage suggesting the company is up for sale?" said Charles Elson, a corporate governance expert and professor of law at the University of Delaware. "Takeovers are a very delicate legal dance."
Avon's shares were down $2.13, or 10 percent, at $18.60 in late morning trading on the New York Stock Exchange.
(Reporting by Ranjita Ganesan in Bangalore and Phil Wahba in New York; Editing by Joyjeet Das and Maureen Bavdek)