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Why Rosetta Stone Was Soaring 25% Higher Today

By Rich Duprey – Updated Jul 17, 2020 at 3:29PM

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There is speculation the language learning specialist may want to sell the business or parts of it.

What happened

Shares of Rosetta Stone (RST) were soaring 24% in late day trading Friday after reported the language learning company was conducting a strategic review.

So what

Although there was no official word from Rosetta Stone itself, the speculation it might sell a part of its business, or the whole company, was enough to send the stock running higher. While strategic reviews can take many forms and don't necessarily mean a sale, the potential for realizing a premium to the stock by inviting bids often intrigues investors.

Woman with headset in front of a laptop

Image source: Getty Images.

Now what

Rosetta Stone saw surprisingly strong growth in the first quarter despite the effects of the coronavirus pandemic, or rather likely because of it. The language mastery leader said its consumer segment saw a 42% jump in bookings, surpassing its seasonally strong fourth quarter, and while business had been strong before the pandemic hit, it rose even further after as people used their lockdown time to learn a new language or brush up on existing skills.

Of greater importance, though much smaller because it's still new to the business, was Rosetta Stone's K-12 literacy segment, which saw bookings grow 2% over last year. While it's likely been disrupted because of the pandemic, the program offered students free, unlimited access to its programs for the rest of the year.

Rosetta Stone had two tough quarters to end 2019, but the tech stock beat analyst expectations in the first quarter, which could provide an opportunity for a buyer.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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