About three months ago a rumor then a story surfaced that Michael Dell might be interested in taking his baby private. The stock jumped 20% to the rumored price and then traded in a tight range until this week when the story became official and the stock pulled back to match the buyout price.
The stock did not jump 20% then drop 50% then recover 25% and trade at 40% below the rumored price. Why? Because the street knew Dell was serious and could raise the cash through private equity. So what happened to BustBuy? The street knew that Schulze had zero chance of arranging financing. A year from now there will be stories written about all the bagholders that got fleeced by Wall Street.
I disagree. I think the market has already bid up BBY based on a buyout at around $16. Don't forget that after the last announcement of continued declining sales despite their turnaround plan and suppliers demanding quick payments because of their credit downgrades that the stock dropped near $11. I think the market has now bid it up the anticipated 30% premium and I look for a bid for the company to come in right around the current price. The only question remaining is if the board has any hope of the company turnng profitable again. I think they will accept the $16 and be happy with their golden parachutes.