Please ensure Javascript is enabled for purposes of website accessibility

Here's Why American Equity Investment Life Holding Is Soaring on Thursday

By Matthew Frankel, CFP® – Oct 1, 2020 at 12:31PM

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

Shares of the insurer were up by more than 40% midday. Here's what you need to know.

What happened

The stock market was mostly in the green on Thursday, with investors optimistic about a pending stimulus agreement, but most major averages were up by less than 1% as of noon EDT. However, American Equity Investment Life Holding (AEL 0.65%) was soaring, with shares up by more than 40%.

So what

The reason for today's jump wasn't related to American Equity's earnings or anything having to do with the business itself. Instead, news came out that the company received a takeover offer in early September from Athene Holding (ATH) and privately held Massachusetts Mutual Life Insurance.

Hand pointing to paper that says insurance policy.

Image source: Getty Images.

Under the terms of the offer, which was in the form of a letter addressed to American Equity's CEO dated Sept. 8, the pair of insurers offered $36 per share in cash for the insurer, a massive premium to the stock's recent valuation which values the company at about $3.3 billion. American Equity's closing price on Sept. 30 was $21.99, so this offer represents about 64% upside.

Now what

It's unclear if the offer will be accepted; American Equity confirmed the authenticity of the offer and said its board is reviewing it. However, it could potentially be a big windfall for investors, as the $36 proposed offer price represents about 17% upside over the now-higher share price, and far more for investors who have held the stock for a while.

Matthew Frankel, CFP 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.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.