New York City, Gap Inc. shares rose today, lifted by an analyst’s report speculating that the specialty retailer may be taken private.
“With Gap having underperformed in a major way over the past 14 months, the risk-reward ratio now strikes us as favorable,” A.G. Edwards & Son wrote in a client note.
Shares of the Gap rose 19 cents to $21.54 on the New York Stock Exchange, after rising as high as high as $22.19 earlier in the session.
Gap’s stock price has fallen 15% since last June, while the broader Standard & Poor’s 500 index has gained 7% over the same period. A.G. Edwards wrote. But Gap’s stock has gained ground over the past two days, driven by market rumors that the retailer may be the subject of a leveraged or management buy-out.
Other analysts, however, questioned the viability of the speculation. They noted that the size of a potential buyout—the total transaction price was estimated at $28 billion—would be too high for a private equity-sponsored acquisition.
Goldman Sachs issued a note today downplaying the takeover rumors, calling a leveraged or management-led buyout of Gap “unlikely.” Gap’s management has worked hard to attain investment-grade ratings on its debt and is focused on launching its new clothing brand, Forthe & Towne, in two weeks, Goldman noted.