Please ensure Javascript is enabled for purposes of website accessibility

Why Diamond Resorts International Inc's Shares Jumped 25% Today

By Travis Hoium – Jun 29, 2016 at 12:47PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A buyout agreement ends a tumultuous year for Diamond Resorts International Inc.

Image source: Getty Images.

What: Shares of timeshare company Diamond Resorts International Inc (NYSE: DRII) jumped as much as 24.6% today after agreeing to be bought out by a private equity group. Shares traded up 23.7% as of 12:20 p.m. EDT.

So what: Diamond Resorts has agreed to sell itself to Apollo Global Management for $30.25 per share, or $2.2 billion, in an all-cash deal. This is a 58% premium from when the company said it would seek strategic alternatives due to a low stock price. 

Now what: A lot of the downtrend that shares have seen in the past year was due to fear the timeshare industry will come under regulatory scrutiny because of high-pressure sales tactics. And that could still be the case -- but the risk now moves to Apollo.

With very little upside from where the stock currently trades to the offer price, I think it would be prudent to take some, if not all, chips off the table. The only upside potential is from Apollo raising its offer on the company, and there's just as much risk that the deal falls through. Given the pop in shares, it may be time to move on to other investment opportunities.

Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.