Boy, what a day it’s been for investors in Sharps Compliance (NASDAQ:SMED). At the time of writing, SMED stock has skyrocketed nearly 200% higher. Such a move — a tripling of a stock in a given day — is very rare indeed.
Now, Sharps’ market capitalization of around $160 million (after today’s increase) provides more room for such moves. Smaller-cap stocks, and lesser-known stocks for that matter, tend to be more volatile. On days with good news, this can work in investors’ favor.
Such is the case with Sharps today. The company has announced that an affiliate of Aurora Capital Partners will be acquiring Sharps in a deal that values the company at $8.75 per share. You guessed it, that represents upside of more than 200% from yesterday’s closing price.
Now, it’s worth noting that SMED stock has only moved as high as $8.50 per share at the time of writing. Let’s dive into why that may be the case and some of the specifics of this deal.
SMED Stock Surges on Acquisition Announcement
Sharps’ business model is rather compelling, from a mergers and acquisition (M&A) standpoint. This company focuses on business-to-business sales in the healthcare, pharmacy and long-term care markets. With a heightened focus on healthcare as a defensive sector, there’s certainly room for enthusiasm among players in this space to engage in an acquisition.
Aurora Capital Partners is a private equity firm that apparently sees value with Sharps in this environment. Sharps’ board of directors has already unanimously approved the all-cash offer. Accordingly, it appears as though this is a done deal.
That said, it appears there’s some discount being provided to Aurora’s takeover price. Why this is remains unclear. However, investors may simply be looking to exit the stock at such a premium, leaving some money on the table. After all, this deal could take time to close, though there is no contingency for financing with this deal.
On the date of publication, Chris MacDonald did not have (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.