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What: Shares of F5 Networks (FFIV +3.02%) were having a quiet Tuesday afternoon, edging less than 1% higher until 3:30 p.m. ET. That's when Reuters published a report saying that F5 has enlisted a major investment bank to help it find a buyer. Share prices immediately spiked as much as 13.5% higher.
So what: According to Reuters, the company is working along Goldman Sachs in this quest for a buyout offer. More precisely, the company has reportedly already received several interesting offers and needs Goldman to help it sort out which bid to accept.
Reuters did note that F5 has been the subject of takeover bids before and that the current interest could fizzle out just like the previous ones.
Now what: F5 shares have gained more than 40% since bouncing off a deep bottom in February, but they still trade roughly where they were a year ago. Yes, that includes this afternoon's sharp lift.
At the same time, F5 is trading at P/E ratios well above those of its closest competitors. That's justified by F5's higher operating margins, but it could lead to indigestion for interested buyers.
Whether this bidding round leads to a firm offer or becomes a footnote in F5's corporate history, you should expect the stock to jump around until the situation has been sorted out. More than 9% of the stock has been sold short, adding fuel to an already explosive ticker. Share prices have bounced between $86 and $135 in the past year alone.
