June 20, 2011
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 Chinese electric-motor manufacturer Harbin Electric (Nasdaq: HRBN ) built on strong gains on Friday with a massive jump today, tacking on as much as 73% in intraday trading on heavy volume.
So what: Harbin's shares had been torpedoed by a critical report from short seller Citron Research, but they made a bit of a comeback last week after the company refuted Citron's claims. Today, the stock was flying high thanks to a press release saying that Harbin had entered into a definitive merger agreement that would have the company bought out by its chairman and private-equity investor Abax Global for $24 per share.
Now what: Should this buyout go through, it would be a severe blow to skeptics who have sold Harbin's stock short. The stock has already posted hefty gains, but it would still have to rise an additional 70%-plus to reach the buyout price. What does it mean that Harbin's still trading so far below that price? Essentially, investors remain very skeptical that the deal is for real.
I won't jump on this gamble, but over the coming six months or so -- the deal is expected to close in the fourth quarter -- investors on one side of this bet will likely make a killing.
Want to keep up to date on Harbin Electric? Add it to your watchlist.