Shares of Kate Spade (KATE) were down by 3.88% to $22.81 on Tuesday afternoon, amid concerns that if the accessories and apparel retailer were to be acquired it will not be at a premium to the current stock price.

The stock has jumped 56% during the last three months as a result of the speculation that the company was looking to sell itself. Coach (COH) and Michael Kors (KORS) are the top two contenders seen as most likely to acquire Kate Spade.

Piper Jaffray believes its makes the most sense for one of these two luxury retailers to scoop up the company.

"We believe COH & KORS as potential suitors offer strategic value. While we could see COH ultimately wanting to evolve its portfolio with an even great luxury angle, COH buying KATE could help improve the competitive environment for the accessible handbag market and see solid procurement savings as well," the firm said.