Is Liquefied Natural Gas Ltd a takeover target?

Credit: Pieter van Marion

If you guessed one week ago that shares of Liquefied Natural Gas Ltd (ASX: LNG) would trade at $1.29 today, anyone would have thought you were crazy.

On Thursday last week, shares of the ASX-listed US gas exporter traded for as low as 57 cents, before closing at 57.5 cents. But they’ve put on a show for investors in the time since, rising an incredible 121%, including a 23.9% gain so far today.

The company was questioned by the market watchdog earlier in the week regarding the sudden and unusual trading activity behind its shares – including a sharp rise in trading volume – although it said it wasn’t aware of any reason for the share price movements and confirmed it was in compliance with the ASX’s listing rules.

However, it now appears there may be more to the jump than first thought. According to The Sydney Morning Herald, a rising oil price together with rumours of a potential takeover have acted as a catalyst behind the stock’s meteoric rise this past week.

The SMH quoted Martin Corolan, an executive director with Foster Stockbroking, as saying: “I think it’s a clear takeover target on the basis it is construction ready and proven to have the lowest capital cost for development of a greenfield LNG site.”

Woodside Petroleum Limited (ASX: WPL) is being touted as a possible suitor for the business, which now trades with a market value of almost $650 million, although that is purely speculation right now.

Still, it is clear that investors are pricing in a high chance of a takeover offer being put on the table given the meteoric rise in the company’s share price over the last week.

While an offer could eventuate, investors would be wise to not invest in the business based solely on the hope of that occurring. After all, if an offer isn’t put forward, the shares could easily fall again – potentially to the level they were trading at last Thursday.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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