What happened
Shares of risk management company RPX Corp. (RPXC) popped as much as 15% in trading Wednesday after buyout rumors started to swirl in the market. At 2:55 p.m. EST, shares had settled down to an 11.2% gain on the day.
So what
Rumors from IAM Media have circulated that a private equity firm is interested in buying RPX, and Baird analyst Jeffrey Meuler gave that some credence, pointing out that IAM previously reported former CEO John Amster's departure before an official announcement.
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Management has officially said it has no comment about the rumor but that doesn't necessarily mean it isn't true. But no one in the market really knows or is going to comment publicly on what's going on behind closed doors with any RPX transaction.
Now what
Buying on rumors can be risky, and until we know more, this isn't a stock I would be jumping into. If it turns out the rumors aren't true or the buyer backs out, we could see shares fall back to where they traded on Tuesday or worse. And with a trailing P/E ratio of 34, the stock isn't exactly cheap for investors to be speculating on.