What happened
Shares of Insulet (NASDAQ: PODD) were up 15.3% this week as of the market close on Thursday, according to data from S&P Global Market Intelligence. The big jump came following a report that Dexcom (NASDAQ: DCOM) and Insulet are in discussions about a potential merger.
On Monday, a Bloomberg article cited unnamed sources as saying that the two companies were considering a combination of their complementary diabetes-care businesses. However, neither Insulet nor Dexcom have confirmed that they're in merger discussions.
So what
Investors clearly see the prospects of a merger with Dexcom as positive for Insulet. And Insulet needed some good news. The healthcare stock had fallen by nearly 30% year to date prior to this week.
A merger of these two seems to make sense. Insulet makes insulin pumps. Dexcom makes continuous glucose monitoring (CGM) devices. The companies have already teamed up to integrate their respective products into a closed-loop insulin management system that automatically delivers insulin when a person's levels get too low.
Image source: Getty Images.
However, buying any stock on rumors of a potential merger can backfire. It's definitely too soon to celebrate. The sources who spoke to Bloomberg acknowledged that a deal might not materialize.
Now what
Until something definitive is known about a potential tie-up with Dexcom, investors should focus instead on Insulet's other potential catalysts. The company will have a new CEO effective June 1, when former ResMed executive Jim Hollingshead replaces Shacey Petrovic, who said she was stepping down for "personal family reasons."
Hollingshead has served on Insulet's board of directors since 2019. He'll take the reins of the company as it continues to ramp up the launch of the Omnipod 5 automated insulin delivery system.
10 stocks we like better than Insulet
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Insulet wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of April 27, 2022
Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Insulet, ResMed, and ResMed Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
