Shares in London and Johannesburg-listed IT infrastructure services and distribution group Datatec (DTC:AIM) are going bonkers on Wednesday. The stock closed last night at 285p, opened this morning at 312.5p (that's market makers at work), shot up to 337.5p (implying an 18% jump), before easing back to 312.5p.
That's seemingly crazy volatility for a business worth a fraction more than £600m. And surprisingly, only three trades have gone through this morning, according to Morningstar data, two of 1,000 shares at 300p, a third for 1,152 at 340p.
This is typically a surprisingly illiquid stock - just 3,682 shares on average have been traded per day during the past 90 days.
The root cause is a fairly opaquely-worded statement entitled, 'Cautionary announcement'. Read it for yourself here, but in essence, it flags 'negotiations in relation to a transaction' that 'may have a material effect' on the firm's shares.
Here's the mildly ironic bit given today's stock oscillations:
'Accordingly, shareholders are advised to exercise caution when dealing in their Datatec shares until a further announcement is made.'
'The fact that the shares have been ticking up over the last few weeks, and have jumped this morning, strongly implies that there is a takeover in the offing,' explains Megabuyte's Ian Spence.
'We had initially been scratching our heads about the exact nature of the transaction referred to in the statement, but the share price move clearly indicates that Datatec is in talks to be acquired, or at least to sell part of the business,' the analyst continues.
It's also worth pointing out that the stock has been trading at a significant discount to other large infrastructure services peers in recent years, Megabuyte reckons under five-times EV/EBITDA (that's enterprise value to earnings before interest, tax, depreciation and amortisation if you didn't know already) despite more stable trading recently.
'We await further news, and details of what is to be sold and to whom,' concludes Spence.
