Why Dynegy Inc Shares Popped 29% in May

Could a buyout be in Dynegy's future?

Travis Hoium
Travis Hoium
Jun 13, 2017 at 3:20PM
Energy, Materials, and Utilities

What happened 

Shares of independent power producer Dynegy Inc (NYSE:DYN) jumped 28.8% last month, according to data provided by S&P Global Market Intelligence, after rumors flew that the company was going to be taken over. 

So what 

On May 19, the stock popped after The Wall Street Journal reported (linked article requires subscription) that Vistra Energy was in talks to buy Dynegy. And some analysts even thought the bid could go into the mid-teens because Dynegy is one of the biggest power producers in the country. 

Power plant shown at sunset.

Image source: Getty Images.

What's strange about the rumored buyout is that nothing has been said since. Neither company has commented, and it's now been nearly a month with no news. 

Now what 

This is why it's not wise for investors to bet on rumored buyouts, because that's all they are: rumored. That isn't to say that Dynegy won't eventually be bought out, but if it turns out the rumor isn't true, those big gains could be lost. The stock has already given up some ground, and if the company doesn't find a deal soon, shares could continue to pull back. In a rough wholesale electricity market, Dynegy stock may have a lot to lose.