Peter Clarke proposes two explanations for the rumor and denial swirling around NXP.
LONDON – On Friday morning the rumor was that Dutch chipmaker NXP Semiconductor NV was the subject of takeover talks with one or more of Intel, Qualcomm, Broadcomm as a potential buyer. But by the afternoon CEO Rick Clemmer had denied that talks were being held.
The origin of the story was an unnamed banker talking to Dutch newspaper De Telegraaf, whereas Clemmer was quoted rebutting the story by Reuters.
So what is going on?
I can think of two potential explanations. One is the relatively straightforward – and in this case relatively ineffective – 'pump-and-dump' operation. The second is more arcane and fanciful.
In a pump-and-dump operation stock traders acquire a position in a stock and then feed a false rumor into market of some exceptional event such as a potential take-over bid. The stock goes up on the rumor and the originators clear their position at a higher price while others are still piling into the stock. Eventually the rumor is denied or, at least, fails to materialize and the stock returns to somewhere near its previous level.
The net result is that the pump-and-dumpers have made a quick killing at other stocker traders' expense.
There were a couple of instances of rumors of an ARM takeover in 2010 that had the classic signs of such an operation. One tell tale was those who follow ARM closely and understand its markets and relations could not work out who could benefit from acquiring the whole company when they could get nearly as much benefit from licensing IP, which is ARM's business model. CEO Warren East was diligent on each occasion to explain that he knew of no takeover approach and that he could not see the logic of one.
It is unfortunate that the management of companies like NXP have to deal with this (if it is not their own doing!) instead of focusing on developing products that the industries need. I have seen some of NXP's products in LED lighting and my impression was that the company is on the right track to some good.
I wonder if NXP's private equity holders are getting impatient on the wait to see some returns!
There are many Semi companies setting on piles of cash so time is right to make an acquisition of NXP. But I don't know if they will get a bargain, we are talking about a company with a good portfolio.