Why Avid Technology Stock Was Blasting Higher This Week

What happened

Avid Technology (AVID -3.90%), a storied maker of film-, video-, and audio-editing solutions, is apparently for sale, and investors have become excited about the prospect of a lucrative deal. As a result, as of early morning Friday the company’s share price had climbed by almost 19% week to date, according to data compiled by S&P Global Market Intelligence. 

So what

Wednesday afternoon, Reuters reported that Avid is exploring a potential sale. Citing unidentified “people familiar with the matter, the news agency said the company is collaborating with white-shoe investment bank Goldman Sachs on the process. It has requested that interested buyers submit binding offers.

The article did not mention a potential price Avid might fetch in a sale. Those sources said that it isn’t guaranteed that a deal will be reached at all.

Although the company is a storied name in its field, prior to the Reuters report its stock price had fallen by nearly 20% year to date. One reason for this is its first-quarter results, published earlier this month, which missed on both the top and bottom lines. Also, revenue fell marginally on a year-over-year basis, and the company flipped to a net loss according to GAAP accounting standards.

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

Now what

As ever with sale or buyout speculation, investors should exercise care with Avid these days. Assuming the article is accurate, it’s tough to gauge what price the company could nab in a sale. That said, Avid continues to be an important business in its rather limited field; despite determined competition from the likes of Apple and Adobe, and it’s realistic to expect it’ll sell at a premium if it finds an enthusiastic buyer.

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