Please ensure Javascript is enabled for purposes of website accessibility

Why Hollysys Stock Is Soaring Today

By Lou Whiteman – Aug 3, 2021 at 11:09AM

Key Points

  • Hollysys, already the subject of a takeover bid, got a second offer at a higher price.
  • The stock is not yet to the level of the bid, implying the market is uncertain a deal will get done.

Motley Fool Issues Rare “All In” Buy Alert

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

The Chinese automation company has multiple suitors.

What happened

Shares of Chinese automation company HollySys Automation Technologies (HOLI -1.20%) jumped 30% higher on Tuesday after the company said it's weighing a second go-private offer.

So what

HollySys is a provider of automation hardware and software designed to make the industrial and transportation sectors more efficient and improve workplace safety. Last month, the company rejected an offer from CPE Consortium that valued it at $17.10 per share, saying that the offer undervalued HollySys.

A stock chart pointing upward.

Image source: Getty images.

A second group of investors seems to agree with that assessment. Late Monday, Holysys said its board is in the process of evaluating a $23 per share non-binding offer from Superior Emerald Ltd., a consortium controlled by Ascendent Capital Partners and including Changli Wang, who founded HollySys but retired from the company in 2013.

In a statement, HollySys said its board continues to evaluate and consider both the latest offer and the original one with financial advisors and legal counsel. As part of the process, the board has authorized management to enter into a limited period of exclusivity with Emerald "to better assess whether it is in the best interests of the company and its shareholders."

Now what

Shares are higher but still well-below the Emerald offer price. That implies the market doesn't think an eventual offer is a given. It could even suggest that a bidding war between the two consortiums is unlikely.

For investors, it seems dangerous to buy in based solely on the expectations of an eventual takeover. But HollySys still could be an attractive stock.

This largely under-the-radar company now has two investment groups, including one backed by a former insider, who seem to believe the stock was undervalued at its pre-takeover chatter price. If the board ultimately rejects these offers, there's a lot of implied optimism about what the future has in store for HollySys.

Lou Whiteman 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.

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

Hollysys Automation Technologies Stock Quote
Hollysys Automation Technologies
$16.53 (-1.20%) $0.20

*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 analyst team.

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 11/29/2022.

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

Premium Investing Services

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