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Why Sportsman's Warehouse Is Plunging Today

By Rich Duprey – Dec 3, 2021 at 12:29PM

Key Points

  • The merger between Sportsman's Warehouse and Great Outdoors Group was called off.
  • Trade regulators apparently had antitrust concerns over the deal.
  • An analyst sees Sportsman's Warehouse as a better company now than when the merger was announced.

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The outdoor equipment retailer could be giving investors a unique buying opportunity.

What happened

Shares of Sportsman's Warehouse (SPWH 2.04%) were tumbling in morning trading Friday after the outdoor equipment and lifestyle retailer announced its merger with Great Outdoors Group was being called off due to antitrust concerns. Shares were down 18.9% as of 11:55 a.m. ET.

Great Outdoors Group also owns Bass Pro Shops and Cabela's, as well as White River Marine Group. Having received feedback from the Federal Trade Commission, the retailers said they did not believe the merger would have received regulatory approval.

Person skiing downhill on a mountain is making trail of powder.

Image source: Getty Images.

So what

Sportsman's Warehouse was supposed to be acquired for $18 per share by privately held Great Outdoors Group, a 42% premium to the outdoor equipment seller's stock price at the time. 

While its shares had traded at that price level since the deal was announced, they began to dip lower in recent weeks as doubts about whether the transaction could be consummated grew.

Now what

Although the stock is tanking at the moment, Wall Street is actually excited by the opportunity, viewing Sportsman's Warehouse as a deeply discounted stock worth picking up.

Craig-Hallum analyst Ryan Sigdahl rated the company a buy with a new, higher price target of $20 per share because Sportsman's Warehouse is a financially better company than when the deal was announced and is worth more than the agreed-upon purchase price.

He says it's not surprising Sportsman's Warehouse shares are spiraling down at the moment as investors that were attempting to play the arbitrage in the price abandon the stock. That makes the retailer a tempting addition to anyone's portfolio.

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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