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Why WageWorks Stock Jumped 87% in the First Half of 2019

Steve Symington, The Motley Fool

What happened

Shares of WageWorks (NYSE: WAGE) soared 87% through the first six months of the year, according to data from S&P Global Market Intelligence, as the consumer-directed benefits company first caught up on its required quarterly and annual filings with the Securities and Exchange Commission, then later agreed to be acquired.

To be fair, as of the start of 2019, WageWorks had also plummeted nearly 70% from its early 2017 highs after an internal investigation determined it had overstated its revenue and earnings for 2016 and 2017. The scandal led to a bevy of required financial restatements and, ultimately, the ouster of several high-level executives including its CEO and CFO.

On March 14, 2019, however, shares rebounded more than 30% after the company told investors it would file those delayed reports the following week and hold a conference call to discuss its most recent financial results. 

Woman drawing large yellow fish eating smaller yellow fish (acquisitions concept).

Image source: Getty Images.

So what

But WageWorks wasn't done climbing. After drifting higher over the next several weeks, it soared 13% in a single day at the end of April after the company received an unsolicited takeover bid from health savings account specialist HealthEquity (NASDAQ: HQY) for $50.50 per share in cash.

With shares still reeling from its accounting scandal, however, WageWorks didn't immediately take the bait. But on June 27 -- after nearly two months of negotiation -- WageWorks and HealthEquity settled on a final acquisition price of $51.35 per share.

Now what

WageWorks CEO Edgar Montes said at the time: "The combination of WageWorks and HealthEquity will be transformative in our industry and will amplify our impact among clients, brokers, and policymakers. Together with HealthEquity, WageWorks can bring broader, deeper, more innovative solutions to our customers -- giving them greater choice and peace of mind."

The acquisition is still subject to the approvals of both regulators and WageWorks' shareholders. But assuming all goes as planned, it should close by the end of this year.

With the stock closing today only slightly below the agreed acquisition price -- and assuming waiting longer to sell won't result in more favorable long-term capital gains taxes -- I think investors would do well to consider taking their money and putting it to work in other promising stocks.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends HealthEquity. The Motley Fool has a disclosure policy.