It has been quite some time since Carl Icahn has been in the news on the activist front. That changed this week when he announced on his website that Icahn Enterprises IEP is going to initiate a tender offer and proxy content for Southwest Gas Holdings Inc. SWX.
In his open letter to shareholders Oct. 4, he offered to purchase all outstanding shares of the company for $75/share. Southwest Gas Holdings' reaction to the news makes the issue the PreMarket Prep Stock Of The Day.
Timeline: Before the open Wednesday, the company released a response letter to Icahn’s letter and defended its acquisition of Questar Pipelines. The company explained in detail how the purchase would benefit the company in the long run and for the most part said: thanks for the interest in our company, but we're moving forward with the plans.
Price Action On Wednesday: With the word out that Icahn was interested in the company, the issue snapped a four-day losing streak, rallying from $63.43 to $64.92. Without knowing the full intent of Icahn’s plan, buyers were aggressive, but not super aggressive.
Price Action On Thursday: After the company rejected Icahn’s proposal to abandon the acquisition of the Questar Pipeline and make other changes to its corporate structure, he went on the offensive.
Around 2:30 p.m. EST on Thursday, Icahn went public with his intent to purchase all of the outstanding shares for $75/share. At that time, anticipatory buyers piled into the issue. The issue did reach an intraday high of $72 on its initial spike from the news, which was far shy of the proposed tender offer, and backed off to end the session at $69.49.
On much heavier than average volume, the issue gained $4.57 or 7% to close at $69.49.
All Quiet On Friday: The dust has settled from Thursday’s news and from the price action, and it appears the Street is skeptical that the company’s shareholders are going to approve of Icahn’s tender offer.
The reason being: buyers on Thursday’s news are attempting to wiggle out at Thursday’s close.
After a flat open, it went only one penny higher to $69.50 and has traded in the red for all of the session. As of 12 p.m., the issue declined to $68.06 and is now trading actively just above and below $69.
Moving Forward: When there is an activist in an issue and a tender offer is on the table, there is always a chance the shareholders may force a vote to approve the offer. More often than not, shareholders will stand by the top brass’s decision not to accept the offer.
The longer it takes the shareholders to force a vote or take steps to make the company at least seriously evaluate the proposal, the greater the chance of the issue fading back to where it came from.
From a technical point of view, Thursday’s high ($72) is an important resistance level for the issue. The reason being, it coincides with its October 5 high ($71.97) along with six consecutive daily highs back in early September from ($71.76 to $72.19).
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