Why Demand Media Surged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of content farm Demand Media (NYSE: DMD  ) have surged today by as much as 31% before giving back much of those gains on reports that the company was on the verge of going private.

So what: Over the weekend, AllThingsD reported that private equity firm Thomas H. Lee Partners had approached Demand Media to pick up the company for up to $1.2 billion, roughly twice the $605 million that the company was worth before today's jump. Demand Media supposedly bailed on the plans last week over concerns with financing and executive retention.

Now what: The report pegs the initial offer at $11.28 per share, which valued Demand Media at $1 billion. Further talks led to that figure climbing to $1.2 billion, although Demand was only interested due to the large premium that was offered, as it previously had no interest or intentions to sell itself. Even though this deal has fallen through, the prospect of other bidders stepping up to the plate clearly has investors excited.

Interested in more info on Demand Media? Add it to your watchlist by clicking here.

Fool contributor Evan Niu holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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