What happened

Shares of digital promotions specialist Quotient (QUOT) jumped on Tuesday, gaining 11% by 3 p.m. EST, even as the S&P 500 shed 1.5%. That rally put the volatile stock back in positive territory so far for 2023, yet shares are still down over 40% over the past full year.

The jump was sparked by news that the management team is considering a sale that might take it off public markets.

So what

Quotient executives have been exploring a sale process for several weeks, according to a Reuters report that relied on accounts from several insider sources. Quotient is working with an investment bank to explore its options, these sources said .

It is understandable that Quotient would be looking into potentially going private. A collapse in the digital advertising market severely pressured the business in 2022. Sales for the fiscal year fell to $289 million from $521 million, executives revealed in late February. Operating loss expanded to $71 million from $27 million, too .

These shifts have forced executives to prioritize cost cuts and to take on more debt as they position the company to move through a potentially prolonged downturn. A merger would lesson some of those pressures and allow Quotient to continue investing in its growth initiatives.  

Now what

There's no telling whether Quotient will find an appropriate partner, or what the potential sale terms might be in that scenario. Wall Street sent shares higher anyway on hopes that a buyout will occur at a significantly higher price than the company's current market capitalization of roughly $350 million.

Investors can't count on a deal as a pillar of their investment thesis but instead should focus on Quotient's value as a business. That value has taken a hit as sales growth stalled in 2022. Given that the company is also looking at a potential third consecutive year of operating losses, the stock might remain under pressure in 2023.