Why Sohu.com Shares Sank


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 Sohu.com sank today by as much as 10% after the company denied rumors that it was going private.

So what: Sohu skyrocketed yesterday afternoon on reports originating from the South China Morning Post that said Sohu was in talks with investment banks and private equity funds to go private. CFO Carol Yu said there are no such discussions in progress or even being considered and, as such, the rumors are entirely inaccurate.

Now what: Investors tend to get rather excited when there's speculation of a company going private, since any such deal always entails a premium to current prices as incentive for shareholders to approve. The flip side of that is that investors are disappointed that private equity firms are, in fact, not buying out the company. Shares have now returned from whence they came before the rumors surfaced, so the stock isn't really better or worse off after the episode. Market speculation can be a distraction to management, so promptly shutting down rumors allows executives to get back to business.

Interested in more info on Sohu.com? Add it to your watchlist by clicking here.

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The article Why Sohu.com Shares Sank originally appeared on Fool.com.

Fool contributor Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool recommends Sohu.com. 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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