Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Here's Why Waddell & Reed Stock Is Soaring on Thursday

By Matthew Frankel, CFP® - Dec 3, 2020 at 10:58AM

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

This long-established asset management firm is up nearly 50%.

What happened

The stock market was having a decent day on Thursday with most major averages showing modest gains, but asset management firm Waddell & Reed ( WDR ) was another story altogether. As of 10:30 a.m. EST, the company's stock had spiked higher by 49% on the day.

Now what

After 83 years in business and more than 30 as a publicly traded company, Waddell & Reed is being acquired. Australian investment banking and financial services company Macquarie Group ( MQBK.Y -0.47% ) announced that it has agreed to buy Waddell & Reed for $1.7 billion in an all-cash deal. This translates to an offer price of $25 per share, a premium of about 48% to the stock's closing price on Wednesday.

Man looking at laptop and cheering.

Image source: Getty Images.

Once the transaction is finalized, Macquarie Asset Management plans to sell Waddell & Reed's independent brokerage business to LPL Financial Holdings ( LPL 1.07% ) for $300 million.

Macquarie has been actively trying to expand its operations in recent years, and this deal will give it a much larger presence in the U.S. market.

So what

The deal is expected to close in mid-2021. Interestingly, after today's increase, Waddell & Reed is trading for slightly more than the $25 per share acquisition price. This indicates that investors are quite confident the deal will be able to close with no major issues, but it also implies virtually no upside potential from this point unless the terms of the deal are changed or another acquirer swoops in and offers even more.

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.

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

Waddell & Reed Financial, Inc. Stock Quote
Waddell & Reed Financial, Inc.
LG Display Stock Quote
LG Display
$8.53 (1.07%) $0.09
Macquarie Group Limited Stock Quote
Macquarie Group Limited
$143.50 (-0.47%) $0.68

*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 service.

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 12/06/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

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