Vivint Solar Takeout Sparks Buying Interest In SolarCity

Joel Elconin is the co-host of Benzinga's #PreMarket Prep, a daily trading idea radio show.

SolarCity Corp SCTY shares were trading sharply higher by $3.17 (6 percent) at $55.32 in Monday's session. The only relevant news in the volatile sector is a deal by SunEdison SUNE and TerraFrom Power Inc TERP to acquire Vivint Solar VSLR at a 40 percent plus premium to Friday's closing price ($10.88).

Despite the huge premium being paid, the takeout price is in the same area as its IPO of price of $16.

See Also: SunEdison, TerraForm Are Buying Vivint Solar

With a merger in the sector, investors may be anticipating SolarCity as a candidate for a merger or takeover. Interestingly, other issues in the solar sector, First Solar FSLR and Trina Solar TSL are not responding in the same fashion as SolarCity shares.

After a sharply higher open ($55.01 vs. Friday's close of $52.15), it surged to $56.28 before falling back under $56. That marks the highest level for the issue since it peaked on June 26 at $56.71.

It should be noted today's rally is taking place on much higher than average volume. So far, it has traded 2.5 million shares compared with 20-day average of only 1.9 million with over four hours remaining in the session.