Shares of Global Cord Blood Corporation (CO), a provider of umbilical cord blood stem cells storage, are rising sharply on Tuesday, following the company's announcement of an unsolicited non-binding acquisition proposal. As of 12:25 p.m. EST, Global Cord Blood's stock was up by 11.5% after popping by as much as 14.6% earlier in the day.
Global Cord Blood announced that it has received an acquisition proposal letter from Alternate Ocean Investment Company Limited, a subsidiary of Hong Kong-based investment bank Haitong International Securities Group Limited. Alternate Ocean is acting on behalf of an unnamed third party in this proposed transaction.
The offer is to acquire all outstanding shares of Global Cord Blood for $5 per share. The company's shares closed Monday's trading session at $4.32 apiece.
The roughly 15.7% premium (based on Global Cord Blood's closing price as of yesterday) explains why investors are bidding up shares of the healthcare company today. However, it's important to remember that this offer isn't a binding one at this time. Global Cord Blood's board of directors will discuss the proposed acquisition and decide whether to move forward with it or reject it.
What should long-term investors do with this news? Trying to profit off the short-term gains that Global Cord Blood is experiencing today is certainly a risky move. After all, if the company's board of directors decides to reject the acquisition offer, its stock could fall. And if the offer advances, it's much better to decide whether to buy Global Cord Blood's stock based on its underlying business (and that of its would-be acquirer) than based primarily on today's news.
In other words, like much of the day-to-day fluctuations on the stock market, there isn't too much to see here for investors focused on the long game.