Why Avid Tech Stock Exploded Higher This Week

What happened

Avid Technology (AVID -3.90%), a renowned maker of film, video and audio editing solutions, is apparently for sale, and investors are excited by the prospect of a lucrative deal. As a result, by early Friday morning, the company’s stock price had climbed nearly 19% since the start of the week, according to data compiled by S&P Global Market Intelligence.

So what

On Wednesday afternoon, Reuters reported that Avid was exploring a potential sale. Citing “unidentified people familiar with the matter”, the news agency said the company was working with investment bank Goldman Sachs on the process. She asked interested buyers to submit binding offers.

The article did not mention the potential price Avid could get in a sale. These sources said there was no guarantee that a deal would be reached.

Although the company is a legendary name in its field, prior to the Reuters report, its share price had fallen almost 20% since the start of the year. One reason is its first-quarter results, released earlier this month, which missed both the top and bottom results. Additionally, revenue was down slightly year-over-year and the company moved to a net loss under GAAP accounting standards.

Neither Avid nor Goldman Sachs has yet officially commented on the Reuters report.

Now what

As always with sell-or-buy speculation, investors should exercise caution with Avid these days. Assuming the item is accurate, it’s hard to gauge what price the business might get in a sale. That said, Avid continues to be an important company in its rather limited field; despite determined competition from Apple and Adobe, and it’s realistic to expect it to sell for a premium if it finds an eager buyer.

Eric Volkman holds positions at Apple. The Motley Fool holds positions and recommends Adobe, Apple and Goldman Sachs Group. The Motley Fool recommends the following options: $420 January 2024 long calls on Adobe and $430 January 2024 short calls on Adobe. The Motley Fool has a disclosure policy.

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