Ancestry.com and Green Mountain: Bizarro World
You never know what you're going to get on Wall Street.
Let's try yesterday on for size.
Shares of Green Mountain Coffee Roasters (Nasdaq: GMCR) moved 3% higher, despite being attacked -- again -- by billionaire hedge fund manager David Einhorn during his Value Investing Congress presentation.
On the other end of the befuddlement spectrum, Reuters and Bloomberg reported that acquisition talks are heating up for Ancestry.com (Nasdaq: ACOM) , and shares of the leading premium genealogy website stumbled nearly 2%.
Strange, right? Einhorn -- one of the few savvy Wall Street tastemakers that can move stocks with his words -- fails to take down the company behind the Keurig line of one-cup brewers. Buyout chatter -- usually a no-brainer in drumming up buy orders -- fails to move Ancestry.com higher.
Well, what if both moves were warranted?
In Green Mountain's case, the stock was already trading 74% lower since Einhorn singled out the stock for his bearish thesis last October. It's not that Einhorn's concerns are any less valid. The market's simply saying that it has marked down the stock enough to account for the risks that he singled out during last year's Value Investing Congress.
As for Ancestry.com, yesterday's decline may also be justifiable. It's now been nearly three months since the original chatter of potential bidders made the rounds. Final bids were due by early August. Well? After two months of cricket chirping, it's easy to see why the market isn't getting excited.
However, the real reason why Ancestry.com didn't pop on yesterday's news was that what may be the final bidder standing -- the one that reportedly recently resumed negotiations -- doesn't want to pay more than $32 per share for a company that Ancestry.com doesn't want to sell for less than $38.
It's not as easy as splitting the difference, especially if the private-equity firm feels that it's the website's only option. Reports indicate that KKR and Providence Equity Partners dropped out this summer, though it may have been a matter of price. If Ancestry.com is coming off its demand to be taken out at $38, does this open the door for a new bidding war?
Investors don't want to take the chance, and they may be getting cold feet. If Ancestry.com is desperate enough to renew negotiations with a buyer stuck at $32, it may signal a desperation that is often stapled to near-term weakness.
It would seem odd. Ancestry.com is coming off a blowout quarter. However, it's easy to see why the market isn't getting pumped about buyout rumors -- just as it's not letting a new round of Green Mountain bashing force it into spitting out its coffee.
Ancestry.com has been growing its offerings for international users, but it's not the best way to play growth overseas.
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