Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Filtration systems maker Pall Corporation (NYSE: PLL) stock is up more than 18% today on rumors that an acquisition of the company is imminent.
So what: According to the Wall Street Journal, Danaher Corp and Thermo Fisher Scientific look to be the two main bidders for the company, which would be valued at close to $13 billion based on the jump in stock price.
Now what: Frankly, these are the kinds of situations where it's easy to get burned, if you're looking to buy stock. It's hard to find any good reason to buy shares of Pall Corporation on this news. While it sounds like a deal is near, there's just no (legal) way to know if there's any upside, and there's all the downside of a deal falling through, which would lead to the stock price plummeting to its pre-rumor price pretty quickly.
If you're an existing shareholder, it's a harder call. Honestly, if you're not particularly interested in holding shares of either Danaher or Thermo Fisher Scientific, I could understand selling on the news and moving on. However, if you hold your shares in a taxable account and have held them less than one year, it might be worth waiting for this to play out a little more, and try to get to the one-year holding mark to reduce your capital gains tax rate from your nominal income tax bracket to the long-term-gains tax bracket. That could be worth more to you than whatever price the company ends up being sold for, if it does indeed end up less than current speculation.
These kinds of situations, frankly, are guesswork at best. Any decision that you make -- besides just holding your shares if you're a current investor and waiting for this to play out -- is speculation before anything becomes official. Just remember that, and if you do make a move before we have any more information, you're guessing. Maybe you guess right; maybe not. It's probably a better practice to just sit back and wait for more information.
If nothing comes from this and the stock price returns to pre-rumor prices, you still own shares of the company, and for the same reasons as you bought.