What’s going on with the Morrisons share price?

Man holding magnifying glass over a document

The Morrisons (LSE:MRW) share price has been moving like a rollercoaster recently. Despite slowly heading in a downward trajectory over the last five years, the stock has skyrocketed by around 50% over the last couple of weeks. The valuation is now at levels not seen since 2013. What caused this sudden growth? And is it too late for me to add this business to my portfolio?

The surging Morrisons share price

The explosive growth started in mid-June following a takeover bid from Clayton, Dubilier & Rice (CD&R). The private equity firm tried to acquire the whole business for £5.5bn. Seeing the share price jump to match the offer is not that surprising. But after some deliberation, the management team firmly rejected the bid. They said the “Conditional Proposal significantly undervalued Morrisons and its future prospects”.

In my experience, a rejection of the first takeover bid is often followed by a higher bid by either the same or another firm. Personally, I had my doubts about another offer materialising given the size of the deal. However, it seems I was wrong on that one. Oppidum Bidco (a newly formed company indirectly owned by Fortress Investment Group) has just made a bid for £6.3bn that Morrisons has recommended.

This second bid again sent the Morrisons share price flying even higher. And it’s now trading around 265p per share. However, what’s odd is that the acquisition price (which has yet to be approved by shareholders) stands at 254p. So why is the share price higher?

What’s next, and what are the risks moving forward?

It seems that investors are convinced that yet again, another higher bid will be made for Morrisons. This has yet to be seen. But private equity firm Apollo Global Management has announced it’s in “the preliminary stages of evaluating a possible offer for Morrisons”. Meanwhile, there are rumours that Amazon may be looking to expand its existing grocery partnership with Morrisons into a full-blown acquisition.

Needless to say, if another larger offer were to be made, then the Morrisons share price could continue to climb. But to me, this is starting to look like speculation rather than investing. There’s no guarantee that another offer will be made. Not to mention that even if shareholders approve Oppidum Bidco’s offer, the deal may still not go through. 

The Morrisons share price has its risks

The bottom line

Overall, my opinion on the business remains largely unchanged. The management team’s ability to adapt to rising competition and new shifts in consumer behaviour with home delivery has allowed the company to retain its market share and reward shareholders with a sizable dividend.

Therefore, if an acquisition doesn’t happen, the subsequently falling Morrisons share price could be an attractive buying opportunity for my portfolio. However, at its current price, I don’t see much upside potential left. I won’t be buying any shares today.

The post What’s going on with the Morrisons share price? appeared first on The Motley Fool UK.

Instead, I’m far more tempted by this…

Our #1 North American Stock For The ‘New-Age Space Race’

Billionaires like Jeff Bezos, Bill Gates, Elon Musk, and Mark Zuckerberg are already betting big money on the ‘new-age space race’, and for one very good reason…

…because this is an industry that according to Morgan Stanley could be worth $1 TRILLION by 2040.

But the problem is most of their investments are in private companies — meaning they’re largely off-limits for everyday investors.

Fortunately, our team of analysts have identified one little-known company that’s at the cutting-edge of the space industry, and is currently trading at what looks like a VERY reasonable valuation

for now.

That’s why I want to urge you to check out our premium research on this top North American space stock ASAP.

Simply click here to see find out how you can grab your copy today

More reading

  • Morrisons share price surge: should I buy Sainsburys now?
  • Would I buy the WM Morrison share after its price spike?
  • Why were Morrisons shares so cheap?
  • The Morrisons share price: new offer for 252p, plus 2p dividend!
  • The Morrisons share price jumped 28% last week! Here’s why I’m staying away

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Morrisons. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.