What happened
Shares of educational publisher Houghton Mifflin Harcourt (HMHC) rose a quick 14% at the open of trading on Tuesday. The move here, however, was likely tied to company-specific news that came out last week, though nobody is claiming any credit for it.
So what
Citing "people familiar with the matter," Bloomberg reported that Houghton Mifflin Harcourt is exploring corporate options, notably including selling itself to another company. Although nobody is talking about this publicly, the rumor is that private-equity companies are showing some interest here. That makes sense given previous moves in the space among this group. Usually, when a company is bought out, there's a premium paid for the shares.
Image source: Getty Images.
That said, investors should probably tread with caution with regard to Houghton Mifflin Harcourt. Not only did the stock rise today, but it also started heading higher last week on the news. Today just looks like a carryover from that earlier advance. But, more importantly, at this point the stock is up more than 340% over the past year. How much more a buyer will want to pay after such an impressive run-up is something you might want to mull over before jumping in at current prices.
Now what
Wall Street likes a rumor, but the age-old saying is buy the rumor and sell the news. And given Houghton Mifflin Harcourt's already massive price increase, investors might not get the pop they are hoping for here if a deal is ever agreed to. At this point, this one is probably best left to the special-situation investors.
