Why WPP Stock Crushed it on Monday

Is storied advertising company WPP (NYSE: WPP) for sale?

On Monday, stock investors seemed to think so, as many of them snapped up the company's shares on media speculation of a looming buyout offer. WPP ended the day with a nearly 7% gain, which looked particularly good when compared to the S&P 500 index's 0.9% drop.

Talking about a big buy

On Saturday, U.K. newspaper The Times reported that at least one suitor has held talks with WPP management about buying a major stake in the company.

Image source: Getty Images.

According to the newspaper's reporting, France-based peer Havas "was understood" to have held discussions on such a deal. The Times also cited unnamed sources working in the London financial sector as stating that the private equity arm of Apollo and KKR were circling WPP too.

The article's sources stressed that, despite these developments, such interest might not ultimately end in a WPP buyout.

Speculation denied

On Monday, Bloomberg reported that Havas CEO Yannick Bolloré stated his company was not pursuing WPP.

The news agency cited an internal email it had seen, in which Bolloré wrote that "It's our policy not to comment on market rumors, however, given the recent press coverage amplifying these rumors and the questions we've received from colleagues and clients, we want to clarify that we are not in discussions with WPP."

WPP has faced its share of struggles over the years, so if the buyout speculation proves true, it may not fetch a premium price from an acquirer. Given that, and the typically speculative nature of buyout rumors, I wouldn't be a buyer of WPP stock at this time.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends KKR. The Motley Fool has a disclosure policy.