Please ensure Javascript is enabled for purposes of website accessibility

Why QEP Resources Stock Is Soaring Today

By Matthew DiLallo - Updated Apr 14, 2019 at 10:00PM

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

The oil company received an offer from one of its largest investors.

What happened

Shares of QEP Resources (QEP) rocketed nearly 40% higher by 10:15 a.m. EST on Monday. Fueling the surge in the oil company's stock was an offer by one of its largest investors to take it private.

Check out the latest QEP Resources earnings call transcript.

So what

Hedge fund Elliott Associates has offered to acquire 100% of QEP Resources' outstanding shares for $8.75 apiece. The fund, which is already one of QEP's largest shareholders, believes that a sale of the company is the best course of action to maximize its value. The proposed acquisition, which represents a 44% premium to QEP's closing price last Friday, is on the condition that the company closes on the sale of its assets in the Haynesville Shale.

Silhouette of a pump jack with orange sunset in the background

Image source: Getty Images.

Elliott believes that despite QEP's efforts to transform into a pure play on the Permian Basin, the company's stock remains significantly undervalued. Elliott sees the take-private transaction providing the bulk of the company's investors with a compelling premium for their shares. Meanwhile, the move would give Elliott full control of the company so that it can further maximize value.

Now what

Elliott's proposed acquisition of QEP Resources is a step to prod the company to consider selling, either to Elliott or another bidder at a higher price. However, there is no guarantee that the company will pursue a sale since it's still in the midst of its transformation plan, which would see it sell all its assets outside of the Permian and use that cash to retire debt, buy back stock, and finance growth. As a result, it's entirely possible that the company might opt to remain public, which could quickly erase today's gains.

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

Stocks Mentioned

QEP Resources, Inc. Stock Quote
QEP Resources, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

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

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/29/2022.

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.