Why Office Max Shares Soared


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 office-products retailer Office Max (NYS: OMX) jumped as much 30% today, on news that Boise Cascade, a wood-products manufacturer in which it holds a stake, will file for an IPO.

So what: Office Max had originally invested $175 million in Boise Cascade, back in 2004, and has booked a deferred gain of $69 million on the investment. In addition, the retailer is eligible for a special dividend of around $100 million. Boise has not provided pricing details of the offering, but is expected to sell $200 million worth of shares.

Now what: Considering that this unlocks about $170 million in value for Office Max, it's not surprising to see its market cap increase by a similar amount. Still, I'd tread with caution around Office Max. Revenues have declined in recent quarters and, given the headwinds in the industry, it's easy to see profits soon following downward. A single windfall doesn't compensate for fundamental weakness.

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The article Why Office Max Shares Soared originally appeared on Fool.com.

Jeremy Bowman has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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