Insurance stock Root (NASDAQ:ROOT) has had its share of troubles since it started up. In fact, it’s lost quite a bit of its share price since its initial public offering. However, Root blasted up a whopping 34% in Thursday’s trading, and it’s all because someone else took an interest in buying Root
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The reports from the Wall Street Journal detail that Root got a takeover bid from Embedded Insurance, a closely-held insurance company itself. Embedded has made several attempts in the past to pick up Root, the report noted, and now offered $19.34 per share to pick Root up for itself. That’s a substantial premium over even today’s closing price of $12.90 per share. Embedded has been trying to get in touch with Root about a potential sale since last July, but Root seems to be stalling for time. Root’s CEO, Alex Timm, has made several requests involving a potential sale, and Embedded has addressed all of these requests in turn.
Michael Ward, an analyst with Citi, weighed in on the notion himself, noting that selling off Root for that kind of premium was “logical” and that such a move would actually elevate Root to “…the higher end of auto insurers.” This is especially worthwhile as Root was planning to dial back its operations, and the insurance industry itself is having its share of trouble these days. Ward wasn’t alone, either; Wells Fargo’s Elyse Greenspan posted a similar note for similar reasons.
Meanwhile, most analysts are taking a wait-and-see stance with Root. One Buy rating, four Holds, and one Sell makes for a near-perfect Hold consensus rating. With an average price target of $7.25, and Root already well above that, Root stock now comes with 43.8% downside risk should the deal not go through.
