Medifast's stock price rocketed 8.35% to $102.79 a share after Bloomberg reported activist investor Engaged Capital was weighing a bid to take private the maker of weight-loss shakes, snacks and other products.
The hedge fund, which already owns 15% of the company, has been talking with banks and private-equity firms about financing a potential deal for Medifast, the news service reported, citing people familiar with the matter.
Engaged Capital's Glen Welling disclosed the stake in Medifast in November, indicating at the time he believed the company was undervalued and that he would speak to management about a sale of all or parts of the company.
Welling previously served on Medifast's board from 2015 to 2018. His company, Engaged, was also an investor at the time, selling its previous stake in the company in 2017 for a 138% return, according to the news service.
While Engaged has taken positions in companies it believes are undervalued and need some prodding, the hedge fund's bid for Medifast is the first time Engaged has tried to acquire control of an entire firm.
Medifast missed the mark on both earnings and revenue when it recently released its third- quarter financial results.
The nutritional supplements company reported earnings of $1.32 a share, a penny below the estimate of $1.33 of analysts surveyed by Zacks Investment Research.
Medifast reported third -quarter revenue of just more than $190 million, below the $194.7 million estimate of analysts polled by Zacks.