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Why NII Holdings Stock Just Popped 19%

By Rich Smith - Nov 2, 2018 at 4:41PM

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All of a sudden, Nextel is popular again.

What happened

For the second time in two months, shares of Brazilian Nextel cell-service operator NII Holdings ( NIHD ) were soaring today -- up 18.8% on rumors that the company may be for sale.

This morning, mergers and acquisitions news site CTFN reported that Telecom Italia subsidiary TIM Brasil "is in early stage negotiations for the acquisition of troubled rival Nextel."

Map of Brazil under a magnifying glass

Investors are taking a closer look at a possible acquisition candidate in Brazil. Image source: Getty Images.

So what

As rumors go, this isn't exactly news. Bloomberg reported in September that Telecom Italia was sniffing around Nextel. But the fact that the rumor is being repeated today by a second source suggests it may deserve more credence than if this was a single-source story -- and almost two months old, with nothing coming of it, to boot.

Now what

What this news does not tell us, however, is how likely it is that Telecom Italia will bite the bullet and buy NII (which -- with no profits and negative free cash flow -- isn't exactly a prize). Nor does it tell us how much Telecom Italia might be willing to pay for NII and its Nextel franchise, or whether that price will be above or below NII Holdings' new and improved share price of nearly $8.

Tread warily, investor. Because if this rumor proves false, or if Telecom Italia decides to bid less than what NII stock is currently fetching, you could still get burned.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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