Why Coinstar's Shares Jumped

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 movie- and coin-kiosk king Coinstar (Nasdaq: CSTR  ) were cha-chinging higher today on rumors that the company could be in buyout talks.

So what: The New York Post sparked the excitement today as it reported that Coinstar "has been in discussions with an undisclosed private-equity firm for several months and that the talks are heating up."

In order to bring a buyout to fruition, the buyer typically has to pay a premium over the stock's current market price -- sometimes a significant premium. For that reason, investors tend to get excited when their company is on the target side of a takeover.

Now what: The Post's article cited "sources" and an "undisclosed private-equity firm" while Coinstar's representative contacted by the Post declined to comment on "rumor and speculation." Could a buyout indeed be in the works? Sure. But the meager details provided in today's news is hardly enough by itself to warrant rushing to buy Coinstar's stock. For current shareholders, the development of this story could be something to keep an eye on. However, investors are better served continuing to base their buy and sell decisions on their views of Coinstar's business and the stock's valuation in relation to those business prospects.

Want to keep up to date on Coinstar? Add it to your watchlist.

Motley Fool newsletter services have recommended buying shares of Coinstar. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


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