There are several stocks in “holding patterns” due to announced M&A deals. A company may have accepted an offer to be acquired but that won’t stop the speculators from paying an even higher price in anticipation of a better bid coming from a “white knight.”
The most obvious instance for this is Whole Foods which traded $43.64 on Monday, June 19 following the Friday, June 16 news that it would be acquired by Amazon (AMZN - Free Report) for $42 per share. The $1.64 over the deal price was Wall Street’s way of saying a higher bid could be coming, but will it?
The WFM and AMZN deal has a break up fee of $400M which would have to be paid to AMZN, so at 2.9% of the total deal it is not out of the question. There has been plenty of speculation about private equity names coming in and making a stronger offer. That bigger bid could make Amazon pay a higher price, but it could also draw the ire of Jeff Bezos and that isn’t a spot I would want to be in.
The end result is you have to expect that bigger bid if you are buying WFM here.
A Better Play
Xcerra was added to my Stocks Under $10 Investor portfolio on February 15 at about $7.82. The stock was a Zacks Rank #1 (Strong Buy) at the time as earnings estimates were trending higher. Revenue was projected to grow around 11% and the price to book multiple was only a fraction of the industry average.
On April 10 the company announced that it would be acquired by Unic Capital Management for $10.25 per share. The deal needs to be approved and that has yet to happen, but the stock is still trading well below the deal price.
What is more, XCRA reported a very good quarter on June 1, topping estimates on top and on the bottom line.
A Missed Opportunity
Another stock in the service that I manage was being acquired and traded above the announced price. Synernon Medical traded up to $11.25 when the announced deal price was only $11. The company was given some time to find a superior bid, but no other bidder materialized. The stock slide into the expiration of the “go-shop” period and now I am holding this stock into the deal as it has recovered to trade within a dime of the deal price.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
There are several stocks in “holding patterns” due to announced M&A deals. A company may have accepted an offer to be acquired but that won’t stop the speculators from paying an even higher price in anticipation of a better bid coming from a “white knight.”
The most obvious instance for this is Whole Foods which traded $43.64 on Monday, June 19 following the Friday, June 16 news that it would be acquired by Amazon (AMZN - Free Report) for $42 per share. The $1.64 over the deal price was Wall Street’s way of saying a higher bid could be coming, but will it?
The WFM and AMZN deal has a break up fee of $400M which would have to be paid to AMZN, so at 2.9% of the total deal it is not out of the question. There has been plenty of speculation about private equity names coming in and making a stronger offer. That bigger bid could make Amazon pay a higher price, but it could also draw the ire of Jeff Bezos and that isn’t a spot I would want to be in.
The end result is you have to expect that bigger bid if you are buying WFM here.
A Better Play
Xcerra was added to my Stocks Under $10 Investor portfolio on February 15 at about $7.82. The stock was a Zacks Rank #1 (Strong Buy) at the time as earnings estimates were trending higher. Revenue was projected to grow around 11% and the price to book multiple was only a fraction of the industry average.
On April 10 the company announced that it would be acquired by Unic Capital Management for $10.25 per share. The deal needs to be approved and that has yet to happen, but the stock is still trading well below the deal price.
What is more, XCRA reported a very good quarter on June 1, topping estimates on top and on the bottom line.
A Missed Opportunity
Another stock in the service that I manage was being acquired and traded above the announced price. Synernon Medical traded up to $11.25 when the announced deal price was only $11. The company was given some time to find a superior bid, but no other bidder materialized. The stock slide into the expiration of the “go-shop” period and now I am holding this stock into the deal as it has recovered to trade within a dime of the deal price.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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