Equity Buyout Rumors Roil KB Home Stock

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It was a volatile week for KB Home on Wall Street as rumors flew that the nation’s fifth largest home builder may be a prime target for a private equity buyout speculation the company denied and analysts were not taking seriously.


For starters there was the stock price, which yo-yoed up and down several dollars each day, opening at $45.67 on June 4, to finally close at $43.85 on June 7, off nearly 5 percent from the start of the week. That’s a lot of movement for a stock that 10 out of 13 analysts surveyed by Bloomberg News rate a hold, given the stagnation in the national housing market.


Then there was the flurry of options trading, especially heavy buying of calls, which allow buyers to demand the sale of a stock at a given price, assuming in the future it will be worth more. That’s a bullish bet in an era when private equity firms generally have taken public firms private at handsome premiums. At one point on June 4, trades on calls outweighed trades on bearish put options roughly 10 to 1.


James Wilson, an analyst for JMP Securities who covers the homebuilding sector, said there have been rumors of private equity interest in several homebuilders for the past 18 months rumors he does not take seriously.


“The homebuilding sector has never made a lot of sense for private equity,” said Wilson. “And what would KB get out of it? I can’t think of what they’d be able to do privately that they don’t do or haven’t done publicly.”


A KB Home spokeswoman said the company “is not in any discussions” regarding a buyout.

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