(NASDAQ:ACOM) became a leader in online genealogy in 1996. Since then, celebrities and regular people alike have unearthed family connections they never thought possible. (Justin Bieber and Ryan Gosling are related?) The company may be a springboard for meaningful life experiences but, as a stock, its recent performance could have shareholders thinking twice before investing in the past.

Shows, Services and Subscribers
A self-proclaimed family research pioneer, Ancestry has digitized and indexed approximately 8 billion historical records in the past 15 years. The company makes the bulk of its revenue from subscriptions, which give exclusive access to the site's treasure trove of historical documents. For the deep-pocketed investigator, Ancestry offers paternal and maternal lineage testing services, as well as ProGenealogists who are paid by the hour to conduct comprehensive searches of family trees.

So far, all these efforts seem to have paid off. In 2011, Ancestry's revenues increased by 33%, its net income jumped by 71%, and its amount of paying subscribers shot up 22% from 2010, to 1.7 million users . These increases indicate that Ancestry is successfully shaping its own story. But even the best companies can have a dark side.

The Merger That Could Change Everything
On Oct 22, Ancestry quietly revealed that it was undergoing talks to be bought out by European private equity firm Permira Funds. Four days following that, the company was sued by a stockholder, who was concerned that investors would be given short shrift after the merger. The acquisition, should it be approved by shareholder vote, will make Ancestry a private company, and offer $32 in cash per stock owned back to its holders. Seeing as Ancestry's current stock price (as of this writing) is $31.54, up from $29 on the day of the merger announcement, it seems likely that this buyout could happen, and not at much benefit to investors.

Stockholder votes are still being tallied but, even if the merger does not go through, it's clear that Ancestry would prefer to remove itself from the stock market. From a long-term investment standpoint, this is the last kind of company to start buying.

The Final Verdict
Ancestry is by no means a weak company. With the potential buyout from Permira, this company hopes to break away from being just a niche market. Permira could help the company boost its subscriber base, get a larger pool of research content through technological upgrades, and have a broader reach across the world. The company could have a bright future ahead of it, just not as a public company.

Even for short-term "cigar butt" investors looking to get one last puff before Ancestry goes into private equity oblivion, save your money. With the current stock only $0.50 lower than the buyout price, the last puff won't be a satisfying one. It's fine to hold this stock if you want to see how events pan out but, in the case of Ancestry, you shouldn't buy into a company that could be here today, private tomorrow.


This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.