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 Montage Technology Group Ltd (NASDAQ: MONT) jumped more than 20% Monday after the fabless semiconductor company received an acquisition offer.
So what: Specifically, Shanghai Pudong Science and Technology Investment Co has submitted a non-binding proposal to acquire all of Montage for $21.50 per share, or a 22.4% premium to yesterday's close.
Now what: Montage insists no decisions have been made as its board reviews the proposal, which ironically arrives only a month after short-selling firm Gravity Research accused the company of fraud. In its 27-page report, Gravity Research cited what it described as "overwhelming evidence" Montage's largest distributor is a shell company established by a senior employee to help fabricate financial results.
Montage quickly responded several press releases, offering PDF scans of its bank statements in question as well as a brief rebuttal to Gravity's claims. Gravity reiterated its stance in a new report shortly afterward, insisting Montage's reply "provided a series of lies and half-truths to distract investors from the serious allegations covered in the report."
Shares might look cheap trading around 12 times next year's expected earnings, but I'm still cautious given both Gravity's outstanding accusation and the fact today's offer is by no means guaranteed. As a result, I think investors would be wise to take today's gains and put them to work elsewhere.
