CUB Claws Higher as Takeover Talks Ramp Up

The news sparked a price-target hike to $52 from RBC

Deputy Editor
Sep 23, 2020 at 9:15 AM
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It was reported last night that hedge fund Elliott Management and buyout firm Veritas Capital just made a joint bid to acquire aerospace member Cubic Corporation (NYSE:CUB). While the exact value of the offer is still off the table, according to those familiar with the matter, the offer is at a premium to CUB's Tuesday close of $54.73. Cubic currently has a market value of $1.7 billion. The stock is up 8.7% at $59.51 in response.

CUB has had a volatile past few days, as rumors over the buyout bid sent the stock surging on Monday, Sept. 21. The shares hit a seven-month high of roughly $61, and were able to shatter recent pressure at the 180-day moving average. And while the equity did pull back the next day, it is still trading well above this aforementioned trendline. Year-to-date, the equity carries a13.9% deficit.

Analysts are taking notice of the deal, too. Just yesterday, RBC lifted its price target to $52 from $48. However, the majority of analysts following CUB were already quite bullish, carrying eight "buy" or better ratings compared to just one "hold." Meanwhile, the 12-month consensus price target of $57.43 is a 4.9% premium to last night's close. 

Should today's positive price action continue, an unwinding of short interest could push CUB higher. In the most recent reporting period, short interest rose 4.5% to 4.21 million shares sold short. Further, it would take almost two weeks to buy back these bearish bets at Cubic stock's average daily pace of trading, leaving plenty of room for a short squeeze.

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