August 27, 2010 | In: Financial

LNC: Buy the Rumor, Sell the News

A rumor circulated this afternoon this morning that Manulife offered to buy Lincoln National Corporation (LNC) for $32 a share. The stock jumped from a bottom of $21.26 at 10:10 to $23.38 at 14:50 (the stock will probably go UP another buck from in the remaining hour or so). What’s interesting is that MFC also went up on the news, a stock that I bought at C$14.40 a couple of weeks ago. Usually when there is an acquisition rumor the stock of the company to be acquired goes up, and the stock of acquiring company goes down. But since MFC was going down for a couple of weeks now, it seems that the market liked that Manulife is still a strong company that is looking ahead, expanding its business, and is able to purchase other companies if it wants. Expect MFC to outperform the market next week, as the stock is now back over $12, which is a bullish sign.

Lincoln National is an insurance company, with a current market capitalization of $7.41 billion. Manulife’s market capitalization in US is $20 billion.

In all fairness, I personally don’t think that Manulife can afford Lincoln National; at $32 a share this means that Lincoln National is valued at around $10 billion, 50% of Manulife’s market capitalization.

Of course, the market is acting based on a rumor that may or may not be true. We’ll see next week.

1 Response to LNC: Buy the Rumor, Sell the News

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Burger King Takeover Rumor « Fadi El-Eter

September 1st, 2010 at 4:10 pm

[...] now nobody know if the rumor is true or not, and maybe we will not know in weeks (the last takeover rumor reported on this website last week is still to be confirmed or [...]

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