Why Momentive Global Stock Soared Today
What happened
Shares of Momentive Global (NASDAQ: MNTV) -- formerly SurveyMonkey -- soared on Wednesday after unconfirmed rumors of a buyout started circulating. As of 3 p.m. ET, Momentive stock was up 19%.
So what
According to a Bloomberg article citing "people familiar with the matter," somebody may be interested in buying out Momentive. Down more than 70% from its all-time high and trading at a price-to-sales ratio of less than two, the potential buyer likely believes Momentive stock is undervalued at these prices.
It's been a rough year for Momentive shareholders specifically because of attempted buyouts. In February, Zendesk scrapped its plan to acquire Momentive after it was rejected by Zendesk's shareholders. This was particularly painful for Momentive considering it had reportedly turned down competing offers from private equity to pursue the deal with Zendesk.
Permira was reportedly the private equity firm interested in acquiring Momentive before. Perhaps it's considering a new offer with shares down as much as they are.
Now what
When Momentive shared its long-term financial plans with investors back in August, management projected a decrease in operating expenses. Last week, the company moved to improve its operating margin by laying off 11% of its workforce. While many tech companies are laying off workers, laying off this high of a percentage indicates that Momentive's growth prospects are meager right now.
For this reason, it may be in Momentive's best interests to sell to another entity. But considering the company's current situation and lack of details regarding the potential buyout, I wouldn't buy the stock today simply hoping to make a quick return when the deal materializes. Investors have to consider the possibility that today's rumor is simply that: a rumor that might not actually come to fruition.
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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zendesk. The Motley Fool has a disclosure policy.
