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: Shares of fixed-income trading platform provider MarketAxess (NAS: MKTX) were spiking today, gaining as much as 26% in intraday trading on reports that the company may be looking to sell itself.
So what: When a public company sells itself, it's typical for the buyer to pay a premium over the prevailing market price. For that reason, investors tend to get excited when they hear that a company has plans to pursue a sale or is the subject of takeover talk.
Now what: Potential buyers for MarketAxess won't be dummies and will be focused on paying a price that makes sense. That could mean a big premium to what the market previously valued the stock at, but would be a much slimmer premium to what the stock trades at now. For that reason, investors rushing to jump on MarketAxess' stock today may want to take a minute and consider what an acquirer would reasonably pay before they jam down the buy button.
That concern aside, speculating on sales or takeovers can be a heartbreaking undertaking. In any such situation the buyer will want to get the lowest price possible while the seller will want the opposite. That leaves plenty of room in between for no deal to come to fruition and speculating investors to be left wondering why they bought during such a frenzy.
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