Remember Helios and Matheson (OCTMKTS:HMNY)? As you may recall, the Moviepass parent company crashed and burned in 2019, filing for Chapter 7 bankruptcy in early 2020. But, after a year of being declared defunct, its thinly traded stock has shown small signs of life. The reason? It seems to be falling in line with the trend of Reddit penny stocks.
The rumor mill is abound with talk of the company — which offered monthly unlimited passes to movie theaters at a set price — making a comeback. In addition, longstanding rumors of a takeover from deep-pocketed buyers like Amazon (NASDAQ:AMZN) or Netflix (NASDAQ:NFLX) have been making the rounds.
Admittedly, the rumors surrounding HMNY are likely just talk. The market seems to think so, anyway. The stock still trades for less than a penny per share. There may not be much opportunity here. Yet, it does bring to mind the potential for some of this year’s most popular penny stocks to rally on mergers and acquisition (M&A) rumors.
As “meme-stock mania” has long since peaked, many Reddit stocks are struggling to bounce back to their February highs. It may be a bit speculative. But, for several of these small companies, it’s easy to see them as also being potential targets for strategic or financial acquirers.
So, which Reddit penny stocks could be takeover targets? Or, at least, which ones are hoping for a takeover? Consider these seven names as definite possibilities:
- Allied Esports Entertainment (NASDAQ:AESE)
- Cinedigm (NASDAQ:CIDM)
- ION Geophysical (NYSE:IO)
- Nokia (NYSE:NOK)
- Organigram (NASDAQ:OGI)
- Ovid Therapeutics (NASDAQ:OVID)
- Trivago (NASDAQ:TRVG)
Reddit Penny Stocks: Allied Esports Entertainment (AESE)
In recent weeks, esports venue operator Allied Esports Entertainment has tried to mount a rebound. But, at around $2.78 per share, the stock has yet to bounce back towards its highs from earlier this year. Yet, consider this one of the Reddit penny stocks most likely to see interest from potential buyers.
How so? For starters, the “story” behind AESE stock is already pretty M&A-heavy. As you may recall, the company received a low-ball takeover offer from the casino and gaming operator Bally’s Corporation (NYSE:BALY). This was on the heels of the company trying to divest its non-core World Poker Tour (WPT) unit.
So, what’s the latest? So far, Bally’s hasn’t come back with a higher offer. However, with the WPT deal still pending, Bally’s could come back to the deal table. And how about other potential acquirers in the gaming space?
Other mid-sized casino and gaming companies, such as Golden Entertainment (NASDAQ:GDEN), could possibly decide this name is a great bolt-on acquisition. Private equity could be interested as well, given the opportunity to roll-up this emerging industry. I wouldn’t buy AESE stock on this factor alone. However, there’s plenty of potential for it to see another pop on takeover talk.
Lately, the NFT (non-fungible token) phenomenon has been garnering CIDM stock a ton attention. However, Cinedigm’s core streaming business may be the more interesting part of the story here — and the reason that it’s one of the top Reddit penny stocks that’s most likely to get a takeover offer.
Cinedigm is a small-fry in the content streaming space. That said, it’s been building up its content library, via acquisitions as well as deals like the one it inked with Reddit favorite Genius Brands (NASDAQ:GNUS).
Now, who may be interested in acquiring Cinedigm? With its $245 million market capitalization, even with a takeover premium, a deep-pocketed media buyer could easily swallow up this “also-ran” operator. However, a more likely buyer would be another similarly sized peer. That is, another media name operating on the fringes of the entertainment business.
In fact, a tie-up between Cinedigm and Genius Brands could be a perfect fit. Genius — with its valuation still-inflated at a $544 million market cap — could merge with this company in an all-stock merger. Such a deal would have tremendous operating synergies. It would also help Genius move one step closer to becoming a major name in the entertainment space.
Again, this thesis is speculative at best. But this stock, at $1.48 per share, could see yet another boost if a possible buyer steps up to the plate.
Reddit Penny Stocks: ION Geophysical (IO)
Oil has made a tremendous comeback over the past year. That’s been a boon for oil exploration and production (E&P) stocks. But, it’s also been a shot-in-the-arm for oil services plays like IO stock.
As InvestorPlace’s Mark Putrino discussed on Apr. 21, ION Geophysical provides data-driven solutions for the E&P industry. It’s a niche business and one that’s not immune to the cyclical nature of the oil and gas industry. However, with things on an upswing, it may decide that now’s the time to scale itself up.
Much like the E&P space, ION’s industry is filled with small operators. This company itself has a market cap of just $39.6 million. But, while it may not get bought out by a larger rival, it could itself become an acquirer of the competition. For example, there’s another publicly traded name in this space, Dawson Geophysical (NASDAQ:DWSN).
A combination of these two companies could help wring out economies of scale. Not only that, Dawson is sitting on a cash-rich balance sheet — $41.5 million versus a $55.6 million market cap. An all-stock merger with this company could give overleveraged ION a huge infusion of cash.
Both of these companies may be more focused on the oil-patch recovery than on M&A. But it’s still a possibility, earning this name a spot on this list of Reddit penny stocks.
With its nearly $27 billion valuation, it’s odd calling Nokia a penny stock. But, having a stock price of around $4.70 per share — under the $5 per share cutoff point — NOK stock does fit into this category.
Meme-stock excitement helped spring some life back into this telecom equipment “also-ran” name. But, while rivals like Ericsson (NASDAQ:ERIC) and Huawei have done a much better job at capitalizing on the “5G Revolution,” Nokia has still generated a fair amount of business from this development.
Late last year, NOK stock was listed as one of the “top European M&A targets” in a survey conducted by Bloomberg. So, who would be a likely buyer of this company? Granted, already being a large-cap name, there’s a limited buyer pool for Nokia. However, there are a few possibilities.
For example, a name like Motorola (NYSE:MSI) may see Nokia as a worthwhile merger partner. And don’t count out private equity buyers, either. With $1.9 trillion “in dry powder globally,” financial buyers need to target large companies like this one to move the needle for their funds. NOK shares may no longer have meme-stock trends on their side. But, any sort of takeover chatter may be enough to push this high-profile member of the Reddit penny stocks back up above $5 per share.
Reddit Penny Stocks: Organigram (OGI)
Sundial Growers (NASDAQ:SNDL) has been the cannabis penny stock making the most headlines lately. But, with its $1.44 billion market cap, it’s likely too big for rivals to swallow. However, with its $574 million war chest — the result of dilutive stock offerings — it could also be on the prowl for acquisitions. A possible target? Another one of the Reddit penny stocks, Organigram.
Now, OGI stock itself currently sports a $785 million market cap. This would be tough to swallow for Sundial, if it went with an all-cash bid. But, Sundial could likely pull off a part-cash, part-stock deal. So, what would be the benefit of such a merger?
With a lower forward price-to-sales (P/S) valuation than Sundial, adding Organigram would help smooth out SNDL’s still-frothy forward multiple. This is on top of the obvious cost savings and merger synergies that would arise from combining these two small, Canada-based operators.
And, if pot finally becomes legal on the U.S. federal level? The merged companies would have enough scale to pounce on the opportunity. This possible deal may be wishful thinking. However, if Sundial or any other small marijuana company makes such overtures, it would be more than enough to send OGI stock — now at $2.65 per share — trending higher once again.
Ovid Therapeutics (OVID)
Next up on this list of Reddit penny stocks is Ovid Therapeutics. Back in March, I discussed several biotech penny stocks worth a look. One of these possible opportunities was OVID stock. In particular, a strength that this biotech play possessed was that it had already established a deal to commercialize the leading candidate in its pipeline.
Takeda Pharmaceutical (NYSE:TAK) made a licensing deal for the company’s Soticlestrat seizure treatment. The financial consideration? $196 million upfront, with a total financial payout of $856 million. Like I put it before, that’s not a bad chunk of change for a small-cap biotech company.
After popping on the news, Ovid Therapeutics has held steady. Today, OVID stock changes hands at just under $4 per share. But, there’s a long-shot catalyst that could give it a big boost. I’m talking about its partner, Takeda, buying the whole company.
Sure, with it locking down the rights to a flagship candidate, there’s little need for Takeda to do a buyout. That’s especially true, given that analysts like Charles Duncan of Oppenheimer have become bearish about the rest of Ovid’s pipeline. Duncan recently downgraded the stock, mainly due to the company scrapping development of its OVID-101 Angelman syndrome treatment. Even so, though, Takeda already owns around 15% of Ovid. If Soticlestrat ends up becoming a larger-than-expected success, the Japanese pharmaceutical giant may find it worthwhile to buy up the rest.
Reddit Penny Stocks: Trivago (TRVG)
Last up on this list of Reddit penny stocks is Trivago. Thanks to both the “travel recovery” trade and Reddit-stock mania, TRVG stock has already gone “to the moon.” In the past six months, shares of Trivago have rallied around 162%. Today, it trades at $3.56.
At first glance, it seems that travel stocks like this company — an operator of travel booking sites, mainly in Europe — have gotten overheated. The vaccine rollout in the U.S. and Europe has made many enthusiastic about surging travel demand later this year. However, all bets are off as to whether this plays out.
Basically, the “pent up demand” thesis may fail to meet expectations. If a recovery doesn’t happen as projected, stocks like this one are at risk of a correction. Yet, if this stock pulls back, M&A talk could save the day.
At lower prices, strategic buyers may see Trivago as a worthwhile bolt-on. Think Booking Holdings (NASDAQ:BKNG) or Expedia Group (NASDAQ:EXPE). In short, don’t buy TRVG stock on takeover potential today. Instead, save it as a possible buy following any travel-stock selloff.
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On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.