RadioShack Buyout Chances... Facts vs. Fiction (RSH, BBY)

RadioShack Corporation (NYSE: RSH) is hardly trading up even after reports from Bloomberg have noted that RadioShack could become a takeover target.  This is as short sellers have increased their activity betting against the stock and the short interest was recently at new highs in modern times.  If RadioShack was truly a takeover candidate, wouldn’t the stock be up considerably after the bruising it has suffered?

The stock was at $7.30 this week and that was after a 52-week high of $16.70.  Turnaround CEO Julian Day has left the company to fend for itself and its prior reviews to be acquired have ended.  Best Buy Co. Inc. (NYSE: BBY) was considered a buyer, but the electronics retailer is now battered enough on its own that this makes no real sense. 

Private equity firms were also expected to be buyers of RadioShack.  That just never came about.  If any private equity firm made any offer or made any outreach, it was a ‘takeunder’ rather than a takeover.  And the low P/E ratios today that make this screen out as a value stock now face an expected decline in earnings during 2012.

Anything is possible in the world of M&A.  RadioShack’s most recent press release shows this as its footprint: “RadioShack’s retail network includes approximately 4,670 company-operated stores in the United States and Mexico, 1,490 wireless phone centers in the United States, and approximately 1,100 dealer and other outlets worldwide.”

The footprint would have a value to someone at some price.  The question is whether the price is at more than $1.00.

As far as how much the buyout chances are being given as a success, let;s just say that this stock would not be up 1% even on a weak day in the stock market.  If a buyout was really believable this would be up 10%, 20%, or even more.

JON C. OGG