Why CommonWealth REIT Shares Skyrocketed

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

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 CommonWealth REIT (NYSE: EQC  ) , an office-based real estate investment trust that was down by as much as 11% yesterday, reversed course and exploded higher by as much as 41% after two of its largest investors offered their take on CommonWealth's valuation in an open letter.

So what: Before the opening bell, Corvex Management and Related Fund Management announced that they've collectively acquired a 9.8% stake in CommonWealth REIT. The release notes the opinion of these two funds that CommonWealth shares are greatly undervalued and could hit $50 (a 215% gain from yesterday's closing price) within two years if remedies -- including the alignment of management's compensation with those of shareholders -- were enacted to enhance shareholder value over the long term. Both funds also demanded that CommonWealth retract its 27 million share offering to pay down some of its debt. But, most importantly, at the end of Corvex and Related's open letter, it states the willingness of both parties to "acquire all outstanding shares [of CommonWealth REIT] at a significant premium to current market value" assuming the board is unwilling to cooperate with their demands.

Now what: It looks as if we're about to have a brouhaha between CommonWealth's board of directors and Corvex/Related. Without anything more than a letter, I'd need to see more evidence of how Corvex/Related plan to derive the funding needed to purchase the remaining shares of CommonWealth -- assuming it could even get around the company's poison pill currently in place. This is watchlist worthy, but it's still far too early in the game to tell which way CommonWealth will head next.

Craving more input? Start by adding CommonWealth REIT to your free and personalized Watchlist so you can keep up on the latest news with the company. 

If you like dividends, you'll love these nine stocks
If you're on the lookout for high-yielding stocks, The Motley Fool has compiled a special free report outlining our nine top dependable dividend-paying stocks. It's called "Secure Your Future With 9 Rock-Solid Dividend Stocks." You can access your copy today at no cost! Just click here.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2279965, ~/Articles/ArticleHandler.aspx, 9/27/2016 1:39:53 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,226.35 131.52 0.73%
S&P 500 2,160.04 13.94 0.65%
NASD 5,298.28 40.79 0.78%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/27/2016 1:24 PM
EQC $30.85 Down -0.21 -0.68%
Equity Commonwealt… CAPS Rating: *****