The rumor mill has settled again on its favorite takeover target, the beleaguered Avon Products Inc., and this time it’s Oprah who’s said to be looking to buy into the direct beauty merchant.
A spokeswoman for Oprah cleared up the rumor, noting, “This information is not true.” The rumor pushed the stock up as much as 17.5 percent Wednesday.
The TV personality and branding juggernaut has become something of an investor, recently taking a substantial stake and board seat at Weight Watchers International Inc., a fact that appears to have helped feed the rumor.
Unscrupulous investors have been known to whisper such rumors to boost a stock just as they look to sell out.
As the close approached on Wall Street, the stock was still up 6.7 percent to $3.72. More than 23.1 million shares traded hands, better than twice the average of 11.1 million. The move left Avon with a market capitalization of $1.6 billion — illustrating just how far the company has fallen since it shot down Coty Inc.’s $10 billion overture in 2012.
Avon has had a tough go of it in the markets lately. Fitch Ratings said last month that Avon’s “liquidity has tightened but remains adequate in the near term” although it continues to wrestle “the top line, margins and cash flow.” The debt specialist said the price investors pay to insure the company’s debt against default shot up last month.
That signals worries on the part of investors an environment ripe for rumors.
It’s a road Avon shareholders have been down before.
The company was the subject of a hoax buyout in May. And the stock jumped again in September when Cerberus Capital Management and Platinum Equity were said to be interested in making a private investment in a public entity, what’s known as a PIPE deal.
Private equity firms have been looking at Avon on and off for years, but no deal has materialized.