This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Shutterfly: When a company is for sale but not yet sold

Stocks in this article: MSFT RUT SFLY SPX XLK YHOO

By Barry Randall

In a recent column, I laid out a case for why the current cult of Innovative Disruption is a distraction to the day-to-day job of finding high quality companies in which to invest. We never fall for that kind of so-easy-anyone-can-do-it analysis. In that column I highlighted some of our holdings that happened to be disruptive to their particular industries, but which we owned for more prosaic reasons like cash flow and market share gains. One example of this was long-time holding Shutterfly (SFLY).

But no sooner had I submitted that piece for publication than my early morning sleep was disrupted by the news on July 2 that Shutterfly had engaged an investment banker to shop the on-line printing firm to prospective buyers. Shutterfly stock closed up nearly 15% that day.

That's categorically a nice thing. But what to do next?

Typically, when one of our holdings is the subject of an actual takeout offer we sell our position immediately. Our attitude is that we're in the long-only equity investing business not the M&A risk arbitrage business. If there's a credible offer on the table, we take it.

We don't wait for higher offers because the firms we typically own don't attract them. They're mature, cash-generating companies that have been public for a long time. Anyone who wanted to kick the tires has had the opportunity to do so.

And buyers of companies like ours tend to pay cash, not stock, for the cash flow of the target company. It's rare therefore that the potential buyer is using highly valued shares to buy its target in a stock-for-stock transaction, which in turn would invite another suitor offering even-higher-priced shares.

So we usually just take the first deal that's on the table. And we sell right away. If the buyer is somebody with an impeccable pedigree like IBM or some no-fooling-around private equity firm with which we're familiar, then we don't even bother selling and just wait for the cash when the deal closes.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs