Why Virgin Media Shares 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 British cable company Virgin Media (NASDAQ: VMED  ) soared 17% today on news that it is in talks with American billionaire John Malone's Liberty Global (NASDAQ: LBTYA  ) concerning a possible corporate transaction.

So what: Liberty Global has been expanding rapidly in Europe, and a deal with Virgin will allow it to apply those valuable growth lessons in the U.K., one of the continent's largest telecom markets. A tie-up would also put Malone head-to-head against his longtime rival Rupert Murdoch, whose News Corp. (NASDAQ: NWS  ) owns 39% of Britain's biggest satellite group, BSkyB.

Now what: I wouldn't buy into the buyout buzz just yet. While Virgin Media did issue a press release confirming the discussions, there's still plenty of doubt on Wall Street over Liberty's ability to finance the deal given its already-high debt load. When you couple that uncertainty with Virgin Media's red-hot stock performance over the past several months, staying on the sidelines seems prudent.

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