What: Shares of natural food company SunOpta (NASDAQ:STKL) surged on Friday following news that Tourbillon Capital Partners, which holds a 9.9% stake in the company, was pushing SunOpta to sell itself. At 3 p.m. EDT the stock was up about 25%.
So what: Shares of SunOpta have tumbled since the beginning of 2015, down about 68% prior to Friday's gain. Tourbillon first disclosed a stake in SunOpta last November, and the company's performance has been lackluster since. During the first quarter, while sales rose 28.6% year over year, the company posted a net loss of nearly $10 million due to a steep decline in gross margin.
In a response to Tourbillon, SunOpta stated that the company would review and evaluate the hedge fund's suggestions. SunOpta also pointed to the progress that the company has made:
"It is important to note that over the last year, SunOpta has worked to transform its business through the Sunrise acquisition and through a more deliberate focus on increasing private label products that offer customers some of the most innovative offerings in the organic, non-GMO and specialty food categories. In addition, our globally sourced ingredients business offers us unrivaled access to organic and non-GMO supply and presents a high barrier to entry for competition. The company remains focused on creating efficiencies, improving operational excellence, reducing debt, and increasing profitability as a means to create long-term value for all our shareholders."
Now what: With SunOpta's stock price down so much, the sale of the company may be an attractive option for investors. SunOpta's market capitalization was just $326 million prior to Friday's jump, less than one-third of annual sales. SunOpta's gross margin has been in free fall for the past decade, declining by nearly half since 2006.
As always, buying a stock solely on the hopes of a buyout is rarely a good idea. There's no guarantee that any kind of deal will take place, and Friday's gains may prove to be temporary if a sale doesn't happen.