Skullcandy Shares Surge On Possible Go-Private Transaction; DA Davidson Downgrades To Neutral

Shares of Skullcandy Inc SKUL surged 16 percent during Wednesday's session following Tuesday evening's announcement of a go-private offer. DA Davidson analyst Andrew Burns notes founder Rick Alden reported a stake of 12.7 percent through his firm Ptarmagin LLC.

Burns believes the takeout scenario makes sense in lieu of Skullcandy's current valuation of about $4 following a continuous decline from just over $11 back in April 2015. He downgraded Skullcandy from Buy to Neutral and boosted his price target $0.50 to $5.

Related Link: Wunderlich Considers The Prospect For A Go-Private Deal By Skullcandy

Burns highlights Skullcandy's underperformance in the headphone category along with management turnover and compression on margins as reasons for the collapse in the company's share price over the past year. He still likes the growth strategy, but counters that bullishness with an understanding of the "tough retail environment."

Shares of Skullcandy closed Wednesday's session at $4.56, up $0.63 or 16 percent.