Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Lattice Semiconductor Are Surging Today

By Timothy Green - Apr 13, 2016 at 12:11PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A state-owned Chinese company has acquired a stake in the semiconductor company, fueling buyout speculation.

Image source: Lattice Semiconductor.

What: Shares of Lattice Semiconductor (LSCC -3.98%) surged on Wednesday following news that Tsinghua Unigroup, a subsidiary of Tsinghua Holdings, a Chinese state-owned company, had acquired a 6% stake in the company. At 11:20 a.m. ET Wednesday, the stock was up about 15.5%.

So what: Back in February, Reuters reported that Lattice Semiconductor was exploring a sale, attracting interest from a prospective Chinese buyer. A deal hasn't materialized thus far, but Tsinghua Unigroup buying a sizable stake in the company could be fueling speculation that Lattice will sell itself sooner rather than later.

Lattice's results have been poor in recent quarters. When the company reported its fourth-quarter results in February, it badly missed analyst estimates for both revenue and earnings, and its guidance was well below expectations. Lattice posted a net loss of $159 million in 2015 on $406 million of revenue, ending a two-year streak of profitability.

Now what: It's unclear whether the move by Tsinghua Unigroup to acquire a stake in Lattice has any implications for a possible buyout, but investors apparently think so, sending the stock soaring on the news. Whether a full buyout would be approved by U.S. regulators is another story. Various deals over the past year for U.S. semiconductor companies, including a $23 billion bid from Tsinghua Unigroup for memory chip maker Micron, and a $2.5 billion bid for Fairchild Semiconductor, were scrapped because of regulatory concerns.

As always, buying a stock solely on the hopes that the company will be acquired is generally a risky move.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Lattice Semiconductor Corporation Stock Quote
Lattice Semiconductor Corporation
$48.95 (-3.98%) $-2.03

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.