Why Spreadtrum Communications 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 Chinese smartphone chip maker Spreadtrum Communications surged 17% today after Tsinghua University, through its subsidiary Tsinghua Unigroup, offered to acquire it for $1.4 billion.

So what: The all-cash offer values Spreadtrum at $28.50 per American depositary share and represents a premium of 20% to its closing price on Thursday. Spreadtrum's stock also spiked earlier this month after management raised its short-term revenue outlook, so Unigroup might be looking to pounce on the strong smartphone demand before the space gets too expensive.

Now what: Spreadtrum said that it is reviewing the proposal and has not made any decisions. "We are enthusiastic about Spreadtrum's business and market position globally and here in China," Unigroup Chairman and CEO Zhao Weiguo said, "and we see Spreadtrum as an excellent strategic fit with Unigroup's overall commercial objectives." Of course, with the stock busting through its 52-week highs and currently trading at a P/E of 15, Spreadtrum shareholders might want to use today's spike to take at least some chips off the table.

Interested in more info on Spreadtrum? Add it to your watchlist.

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The article Why Spreadtrum Communications Shares Soared originally appeared on Fool.com.

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Originally published