Most traders know that a buyout is one of the easiest ways for a stock to shoot up 20% or more overnight. When a public company gets acquired, the buyer often pays a significant premium over the market price, leading to instant gains for shareholders.
The bad news is that these buyout announcements are often difficult or impossible to predict. The good news, on the other hand, is that buyout rumors can be just as tradable as actual buyout bids.
Rumors swirl around Wall Street all the time. Often, it doesn’t even matter if the source of a rumor is known or credible; word-of-mouth gossip can be enough to send a stock soaring. But, once a buyout rumor starts, traders must decide whether to take profits or ride it out and wait for official news.
In the past month, there has been no shortage of mergers & acquisitions rumors. Here’s a look at seven stocks that could be the next takeover targets.
Buyout Rumor: Twitter Inc (TWTR)
Stop the presses — there’s a new Twitter Inc (NYSE:TWTR) buyout rumor. At this point, TWTR shareholders would probably be more surprised if a month passed without a buyout rumor. TWTR shares climbed as much as 4.5% last week on new rumors that Walt Disney Co (NYSE:DIS) could be interested in a buyout of the battered social media giant.
This time, at least, the source of the rumors is credible. Bloomberg reported on Monday that DIS is working with a financial advisor on constructing a possible deal to buy TWTR.
I’ve long been skeptical that tech giants Alphabet Inc (NASDAQ:GOOGL), Facebook Inc (NASDAQ:FB) and Apple Inc. (NASDAQ:AAPL) would ever pull the trigger on a TWTR buyout. However, DIS makes a lot more sense. DIS and other traditional cable TV companies are struggling with cord-cutting. TWTR has a massive online infrastructure and audience already in place. It’s even gotten positive reviews for its NFL streaming so far this year.
It’s never easy to predict whether buyout rumors will come true. However, this one wouldn’t surprise me.
Buyout Rumor: Gilead Sciences (GILD)
This rumor would be quite a doozy. Here’s the theory: Allergan plc Ordinary Shares (NYSE:AGN)’s recent buyout of Tobira Development Inc (NASDAQ:TBRA) could be an indication that Allergan’s next target will be Gilead Sciences, Inc. (NASDAQ:GILD). The fact that AGN paid an incredible 500% premium to market price for TBRA could be a sign of how aggressively AGN is pursuing liver disease treatment.
GILD is one of the leading names in liver disease treatment. This summer, the company got its hepatitis C drug, Epclusa, approved by the FDA. In addition, its nonalcoholic steatohepatitis drug simtuzumab is currently in Phase II clinical trials.
Gabelli analyst Kevin Kedra recently speculated that GILD could be the next logical liver disease buyout for AGN.
While the source of the rumor is once again a credible analyst, I disagree on this one. For the $94.7 billion Allergan, a buyout of $432 million Tobira is one thing. A buyout of $102.4 billion Gilead is a much larger pill to swallow. At the very least, it seems to me to be a huge leap in logic. I’m going to file this one under “unlikely.”
Buyout Rumor: Synergy Pharmaceuticals Inc (SGYP)
There’s no question that M&A deals and rumors in the pharmaceutical space have been heating up lately. Buzz surrounding Synergy Pharmaceuticals Inc (NASDAQ:SGYP) has sent the stock surging nearly 15% in the past month.
Once again, the SGYP rumors have a credible source. Earlier this month, Citi named Synergy a top buyout candidate for Takeda, Japan’s largest pharmaceutical company.
The Financial Times has reported that Takeda set aside $15 billion for U.S/ mergers & acquisitions. Takeda is reportedly looking for targets developing drugs for cancer, gastrointestinal diseases and central nervous system disorders, such as Altzheimer’s. Synergy’s two leading drug candidates, plecanatide and dolcanatide, are both being tested for treatment of gastrointestinal disorders.
At a market cap of just over $1 billion, Synergy seems like it would make sense as a target for Takeda given its treatment focus. Plus, it’s not like this speculation came from the comments under a YouTube video. If Citi analysts see Synergy as a good for Takeda, I’m inclined to agree.
Buyout Rumor: Bazaarvoice Inc (BV)
Bazaarvoice Inc (NASDAQ:BV) is an SaaS platform that helps retailers capture and utilize customer data, including customer ratings and reviews. Earlier this month, a DealReporter rumor indicated that BV was prepping itself to be sold. The rumor also indicated that the company already had several possible suitors in-line. Potential buyers linked to the rumor included Oracle Corporation (NYSE:ORCL), salesforce.com, inc. (NYSE:CRM), Adobe Systems Incorporated (NASDAQ:ADBE), SAP SE (ADR) (NYSE:SAP) and Alphabet.
When the buyout rumors started heating up, William Blair analyst Bhavan Suri weighed in on the gossip. According to Suri, ORCL and ADBE are the two most likely buyers of the names mentioned above.
I’m not going to pretend I know how BV’s services would integrate into ORCL or ADBE’s products. However, Suri didn’t seem to find the idea of a BV buyout absurd, and the deal size certainly makes sense.
Buyout Rumor: Tiffany & Co. (TIF)
Tiffany & Co. (NYSE:TIF) shares have endured a volatile month of trading that has included at least two major rumors about the stock. First, rumors spread that billionaire activist investor Bill Ackman could be interested in taking a stake in TIF. Concrete evidence seems sparse, however. Former Canadian Pacific Railway Limited (USA) (NYSE:CP) CFO Mark Erceg joined Tiffany as CFO this month. Ackman stepped down from Canadian Pacific’s board this month.
On the M&A front, speculation that an unnamed European conglomerate could be looking to acquire TIF circled the rumor mill shortly after the Ackman chatter started. Benzinga reported the rumors came from “multiple outlets” and that they were “very specific.” Ironically, none of the specific details were provided.
It’s now been roughly two weeks since the buyout rumors surfaced, and there hasn’t been any more news about a potential buyer. To me, this one looks like it could simply be a case of opportunistic traders swooping in and starting rumors once the stock had already started moving. I wouldn’t be holding my breath for a TIF buyout any time soon.
Buyout Rumor: Box Inc (BOX)
The Box Inc (NYSE:BOX) rumor started back in early September when the company announced a strategic partnership with Alphabet. The Google/Box partnership is expected to help Box customers gain better access to Google Docs and other apps and services.
When Recode reported the partnership, it also speculated that GOOGL might choose to take the next step and simply go the M&A route with BOX.
On the surface, a GOOGL buyout of BOX would certainly be doable. After all, as of earlier this year, GOOGL had more than $75 billion in cash on hand. BOX’s market cap is only about $2.1 billion. In addition, GOOGL has recently said that it is shopping for M&A targets that can help boost its cloud and app businesses.
I suppose this deal is possible, but it also reminds me of the seemingly baseless speculation that Alibaba Group Holding Ltd (NYSE:BABA) would buyout Groupon Inc (NASDAQ:GRPN) after it took a modest minority stake in the company earlier this year. Even Recode, the source of the BOX rumor, went on to say that GOOGL will “probably not” acquire BOX. I agree.
Buyout Rumor: NXP Semiconductors NV (NXPI)
The WSJ referenced “people familiar with the matter” and said the deal could happen within a matter of months.
The market sure seems to think there’s something to these rumors, as NXP shares soared nearly 17% on the day of the report.
Following the report, Evercore confirmed the possibility of a deal is ”very real” and there would be very little antitrust concerns involved.
According to Dealogic, the technology sector has led all market sectors in M&A activity this year. There have already been more than $463 billion in technology mergers & acquisitions in 2016.
If the WSJ and Evercore analysts say this deal is real, I would agree that it seems very likely. It makes good business sense for QCOM to take on NXPI to help expand its reach outside of the slowing smartphone market.
The WSJ cautioned that QCOM is “also exploring other options,” but this deal looks like one that is highly likely to close at some point down the line.
As of this writing, Wayne Duggan was long BABA stock.