With the plunge in the equities markets, there are certainly some compelling opportunities. Just look at Napster Inc. (NASDAQ: NAPS), an online music operator. The company has $69.8 million in the bank and a market cap of $66.4 million. Yes, Wall Street is valuing the business at below zero.
Well, hedge funds are taking notice (this is a according to Bloomberg.com). For example, Eminence Capital LLC has increased its equity stake to a cool 9%. This is usually the first step in forcing a company to sell out.
One possibility is for Napster to go private. However, this will probably not carry much of a premium.
Instead, I'm sure the hedgies want Napster to get an offer from a strategic player, such as RealNetworks (NASDAQ: RNWK). Oh, and another possibility is JDS Capital Management Inc., which owns eMusic.com. Keep in mind that the firm purchased one million shares of Napster in Q1.
Actually, Napster controls about a majority of the U.S. online music subscription market. The problem: it's a niche market.
So, with hedge funds swarming, it's going to be tough for Napster to ignore things. In fact, in Friday's trading, the company's shares spiked 27% to $1.39 as the rumors buzzed.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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