After a 19% increase last Friday, shares of Rolls-Royce (OTCMKTS:RYCEY) are down over 10% today. On Friday, it was announced that an unknown entity was possibly in the early stages of a deal “for or with Rolls-Royce.” No other details were disclosed, other than that Rolls-Royce may be involved with a “significant corporate transaction, such as a merger or even a takeover offer for the business itself.” However, shares of RYCEY stock are falling today after several analysts broke down the logistics of the deal. The Ghost founder has seen better days, as shares of the company are down over 80% the past five years.
Why Is RYCEY Stock Down Today?
When asked, Rolls-Royce declined to comment on the situation. However, analysts and directors from several firms were happy to provide their input. AJ Bell investment director Russ Mould explained that “It’s very hard to see how Rolls-Royce can strike any sort of deal given the government’s golden share.”
The United Kingdom government uses the golden share, which means that it can veto any deal at its will. In addition, the golden share makes it difficult for a foreign entity to take over Rolls-Royce. The company is also actively involved in “nuclear-power and submarine-propulsion businesses.” As a result, a takeover or merger could be seen by the U.K. government as national security and antitrust policy violations.
Furthermore, Rolls-Royce’s work in nuclear energy is seen as a gem for the U.K. This has led some analysts to further cast doubt on reports of a deal. Mould added that “Prime Minister Boris Johnson looks keen to push nuclear as hard as he can.”
Robert Stallard of Vertical Research Partners is concerned about the possibility of a potential takeover or merger as well. Stallard highlighted the “increasingly protectionist stance of the U.K. Government when it comes to foreign acquisitions.”
5 Wall Street Firms Weigh In on Rolls-Royce
- JPMorgan has a price target of 1.4o British pounds with a “neutral” rating.
- Bernstein has a price target of 1.33 British pounds with a “market perform” rating.
- Deutsche Bank has a price target of 1.16 British pounds with a “hold” rating.
- Societe Generale has a price target of 0.97 British pounds with a “sell” rating.
- Jefferies has a price target of 0.95 British pounds with a “hold” rating.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
