Yesterday was a rare day for Best Buy (BBY) investors. The past two years have seen the stock trade steadily lower, but yesterday a glimmer of hope came back, resulting in a 16% jump in the stock’s share price.
The hype was the result of a news report that indicated the company’s founder, Richard Schulze, would make a $5 billion to $6 billion bid to take the company private by the end of the week. The rumor came from the StarTribune.com, but that report ended up being false.
The company announced Friday that it reached a deal with Schulze to extend the deadline on any potential bid. The new deadline gives Schulze until February 28 of 2013.
For shareholders hanging on to hope that a Schulze bid would erase some of their losses, I would suggest you give up on the stock. The company’s business is eroding, and sales are falling. Black Friday was not successful for the company, and now that Schulze has until the end of February to make a bid, the company’s fourth-quarter results are going to come into play.
Its fourth quarter will not be good, and any bid that Schulze makes will not be enough to warrant continuing to hold on to the stock. Schulze is going to have to convince several private equity firms to help him finance the bid, and considering the state of the company’s business, that is not going to be an easy task.
Best Buy was a great company at its prime, but those days are gone, and are not coming back. The market has changed, and Best Buy was not able to adjust. The company is dying, and there are few, if any, reasons to justify holding on to hope at his point.
Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va. His articles typically cover big-picture events and forecasting what impact they will have on the stock market. In addition to writing for Fresh Brewed Media, Michael also wrote for AOL's BloggingStocks for three years, focusing most of his attention on the energy and technology sectors.