What happened

Shares of QEP Resources (NYSE:QEP) rallied sharply in January, surging 46.9% for the month, according to data provided by S&P Global Market Intelligence. Fueling the oil producer's rally was an offer by a hedge fund to take the company private.

So what

Hedge fund Elliott Associates, which is one of QEP Resources' largest shareholders, offered to acquire all the shares it doesn't already own for $8.75 in cash per share. Elliott made the offer due to its view that the oil company's stock "remains deeply undervalued" and that a sale would be the best approach to maximize shareholder value. In response to the offer, QEP Resources hired advisors to carefully consider the proposal as well as its alternatives.

Check out the latest QEP earnings call transcript.

A barrel standing on a grey floor with money bursting out of it with a happy businessman in a celebrating next to it.

Image source: Getty Images.

The proposed take-private offer comes as QEP Resources works through its strategic plan to transform into a pure play on the oil-rich Permian Basin. The company took another step in that direction last month as it closed the sale of its assets in the gas-rich Haynesville Shale. The company plans to use those proceeds to pay down its credit facility and help fund part of its 2019 capital program.

Now what

QEP Resources has yet to accept Elliott's offer, which leaves several possible outcomes. The oil and gas company could find another buyer willing to pay more, take Elliott's proposal, or reject a sale and stick with its strategic plan. While it's possible that a higher rival bid could emerge, that potential catalyst alone doesn't make this oil stock worth buying, since there's a risk that the company might not sell itself at all, which could cause shares to plummet. Because of that, investors are better off watching this oil stock from the sidelines.