When Provide Commerce
It wasn't a case of masochistic investors bent on capital depreciation. It was just the speculative buzz that a higher bid would be forthcoming. After all, wouldn't Motley Fool Stock Advisor pick Amazon.com
Also, wasn't $33.75 a bit cheap for a company that had closed at $30.23 on Friday?
The answers to those two questions are (1) perhaps, and (2) not necessarily.
Yes, Amazon would have made a great match. A services-minded online juggernaut like Yahoo!
A significant investor has committed to voting in favor of the Liberty Media deal, and against any other possible offer, which is probably just enough to scare away any other possible suitors. In the past, we've seen everything from cruise line companies to video rental chains forgo higher hostile bids in favor of accepting lower, mutually agreed-upon offers.
So what about the price? If a 12% premium sounds a bit weak, let's examine how Provide Commerce shares were trading in the weeks prior to the official announcement. The stock traded as low as $22.51 last month, and spent the entire month of October in the low $20s. Negotiations take weeks, if not months, to conclude, so this deal may have originally represented as much as a 50% markup to the market price.
The stock really had no material news to offer after its fiscal first-quarter report on Nov. 2, so it's quite possible that word of a deal started to leak early and speculators just bought on in.
Provide Commerce has been a wild ride since I singled it out to members of the Motley Fool Rule Breakers newsletter service back in March. The buyout represents a reasonable 23% premium over the recommended price. It seems like a smooth, market-thumping gain in retrospect -- if and when the buyout goes through as expected.
That's fine. That's what ultimate growth stock investing is about, after all. The near-term swings may be wild, but those are the risks one must often take to achieve greater rewards. Provide will ultimately fit in with Liberty Media's empire. Liberty owns a 20% stake in IAC/InterActive
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Longtime Fool contributor Rick Munarriz did use Provide Commerce to deliver flowers to his wife on April Fool's Day. Yes, it's a holiday around these parts. He does not own shares in any of the companies mentioned in this story. T he Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.