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Why the Myer Holdings Ltd share price rocketed 16% higher today

Much to the relief of its long-suffering shareholders, the Myer Holdings Ltd (ASX: MYR) share price is heading in the right direction during trade on Monday.

At the time of writing the department store operator’s shares are up a massive 16% to 46.5 cents.

What happened?

With no news out of the retailer or from its major shareholder Premier Investments Limited (ASX: PMV), it is unclear at this stage why its shares are surging higher.

But what is clear to see is that there has suddenly been a significant lift in the volume of shares being traded.

The average daily volume for Myer’s shares stands at approximately 4.2 million shares. Whereas today there has already been 10.2 million shares traded at lunch.

It was a similar story during trade on Thursday and Friday. On Thursday 10.1 million shares changed hands and on Friday there were 13.1 million shares traded on market.

Is it a takeover approach?

There has been speculation floating around for a while now that Myer could be a takeover target.

The most likely candidate appears to be Solomon Lew’s Premier Investments. The company is already a major shareholder and appears to believe it has a strategy that could reignite the fallen giant.

If Premier Investments has been adding to its shareholding over the last few trading days, it is quite likely that a change of interest notice will have to be submitted to the ASX advising of an increase in its holding.

A notice is required if a major shareholder increases its holding by 1% or more. Considering the first bout of buying appears to have started on Thursday, a notice would have to be submitted today (within two business days) advising of the change.

Should you invest?

I wouldn’t recommend investors get caught up in takeover talk. While a takeover would certainly send the share price hurtling skywards, if one doesn’t occur then its shares could take a sharp tumble.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Premier Investments Limited. 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 Scott Phillips.

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