Why Shares of Diamond Resorts International Inc Popped 28% Today

Could a buyout be on the horizon for this timeshare giant?

Travis Hoium
Travis Hoium
Feb 25, 2016 at 1:25PM
Consumer Goods

Image source: Diamond Resorts International.

What: Shares of Diamond Resorts International Inc (NYSE:DRII) jumped as much as 28% Thursday after the company reported earnings and that it will explore strategic alternatives.

So what: Fourth quarter revenue jumped 18% to $273.6 million and net income more than doubled to $49.7 million. But financial improvement isn't what got investors excited about Diamond Resorts International on Thursday. 

Management also announced that it would seek "strategic alternatives to maximize shareholder value." Investment bank Centerview Partners has been hired and will look at the company's options. This could include everything from selling the company to a strategic buyer to taking it private. 

Now what: The move Thursday is really just speculation that someone will swoop in with a big offer for the company. That could be the case eventually, but it's also possible the stock will lose all of Thursday's pop over the next few days.

Timeshare sales can be great in good economic times, making growth look phenomenal, but if the economy slows, interest rates rise, or regulations go against the industry it could eat into value very quickly, something we saw during the last recession.