When outside bidders are vying for control of a company, management and shareholders of the target will often hold out for a sufficient premium to the current price. After all, if shareholders can sell their shares right now for a certain amount, they should get more if they actually agree to.
On rare occasion, however, the target management and board will actually agree to a takeover price below the current market price! This may sound unbelievable, but it happened this week when Jones Soda (OTCQB:JSDA) agreed to be acquired for under $10 million. On the day before the announcement, however, the market cap of the stock was over $20 million.
Even after the announcement, shares of Jones Soda continue to trade above the value of the take-under price: the company still trades for over $14 million, even though Jones' board has agreed to the transaction!
So what is going on here? Has the market gone crazy, or does the market see potential in the share price that the board is missing? Shareholders must approve the take-under transaction before it can go through; but at the current price, you'd have to think buyers would be nuts to pick up these shares unless they can defeat the merger. Nevertheless, almost three million shares traded hands immediately following the announcement.
So are these buyers nuts, or can they defeat the merger? I can't really tell. However, a cursory look at the financial statements of Jones appears to suggest it is selling itself for less than its liquidation value. The filing of lawsuits appears imminent.
If you spend enough time watching the markets, you will come across rare, shocking stories every once in a while. But I haven't seen anything as weird as this take-under offer since this occurred in September of 2008.