The beaten-down shares of cloud data intelligence company Sumo Logic (SUMO -1.00%) jumped by almost 55% in value this week, according to data compiled by S&P Global Market Intelligence. That was logical, as rumors swirled around the stock about buyout interest from not one, not two, but three private equity firms.
Those rumors kicked off strongly on Monday with a report in The Information saying Sumo Logic had drawn the interest of the three firms. Citing “a person familiar with the matter,” the site said that Thoma Bravo, Vista Equity Partners, and Francisco Partners have all contacted Sumo’s CEO Ramin Sayar inquiring about a potential buyout.
That article caused quite a stir in the Sumo world, which was maintained throughout the week. Neither Sayar nor any other executive at Sumo has yet commented on the speculation. The three mentioned firms are also keeping mum about it.
Like many tech companies over the past year, particularly the smaller and more specialized ones, Sumo has been hit with waves of investor sell-offs. As a result, its share price has declined by more than 40% over that stretch. This was sufficient to attract an activist investor, Scalar Gauge Fund, to buy a stake in the company. Scalar was successful in getting one of its partners, John Harkey, appointed to the board of directors.
It’s always wisest to invest in a company on the basis of its fundamentals, rather than any possibility it’ll be acquired. We should stress here that, for now, the private equity buyout of Sumo is speculation at best, vaporous rumor at worst. This could very well be a wait-and-see situation.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.