A fresh report cites sources stating that CVS Health (NYSE:CVS) is interested in buying out Signify Health (NYSE:SGFY). Neither of these two companies has confirmed the takeover interest, as of this writing. Still, SGFY stock jumped 15% this morning on the speculative report.
A Wall Street Journal article released yesterday declared in the headline, “CVS Plans to Bid for Signify Health.” CVS, of course, is a drugstore giant. Meanwhile, Signify Health uses technology to facilitate in-home care, and also “offers in-home health evaluations for Medicare Advantage and other government-run managed-care plans,” the Journal notes.
Thus, if CVS is looking to expand in home-health services, a takeover bid for Signify Health would make sense. However, before eager traders start gobbling up SGFY stock, they should read the fine print.
First of all, the takeover talk is sourced from unnamed “people familiar with the matter.” Furthermore, the Journal acknowledged that there’s “no guarantee” that CVS will reach a takeover deal with Signify.
What’s Happening With SGFY Stock?
Also, it’s been reported that spokespeople for both Signify Health and CVS wouldn’t comment on the rumors/speculation. This means that, as of this writing, all of this takeover talk remains unconfirmed.
Still, this might not matter to some eager traders. Some might have simply read the headline, “CVS Plans to Bid for Signify Health.” And then placed a trade without reading the rest of the Wall Street Journal article.
So, perhaps it shouldn’t be too surprising that SGFY stock rallied 15% this morning. Signify’s market capitalization is between $6 billion and $7 billion. In contrast, CVS’s market cap is $134 billion. Hence, the takeover talk is probably perceived as more impactful for Signify Health than it is for CVS. This may explain why CVS stock didn’t move much this morning.
Hopefully, for Signify Health’s shareholders, this won’t turn into a “buy the rumor, sell the news” type of situation. Otherwise, some folks might learn a harsh lesson later on about hasty trading versus informed trading.
On the date of publication, David Moadel 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.