There's nothing like a takeover rumor to inflate the price of a stock. That dynamic was in play on Monday, with solid-state chip-component maker Silicon Motion Technology's (SIMO 0.98%) American depositary receipts (ADRs) blasting nearly 13% higher on scuttlebutt of a potential buyout.
In an article published Sunday afternoon and citing "people familiar with the matter," Bloomberg said Silicon Motion is currently exploring a possible sale. It is holding talks with several potential acquirers and is working with advisors to assist with the decision.
None of those would-be acquirers were identified, nor were Silicon Motion's advisors. The article's sources said that a final decision on the fate of the Taiwan-headquartered tech company had not been reached, and there was no guarantee it would enter into a sale.
Silicon Motion has not yet commented on the article.
At the moment, Silicon Motion's market cap is just over $3 billion. It's likely a sale of the company would fetch a premium as it's posted healthy revenue growth and typically posts a healthy bottom line. In 2021, for instance, its top line rose by 71% over the 2020 figure to almost $924 million, while its net profit more than doubled to over $200 million.
Adding to the value of Silicon Motion as a takeover play, earlier this month the company announced it is expecting slightly higher sequential revenue growth for its first quarter than it was previously guiding for. It's also forecasting the same for its gross margins.
Investors are not encouraged to trade on takeover rumors as deals can go sour with even the most determined of sellers. But Bloomberg is a credible news organization, so it's more than likely takeover talk is occurring at Silicon Motion as we speak.