MGL Asset Management Group's press release purporting to offer $7.25 per share for Krispy Kreme Doughnuts (NYSE: KKD) was pretty quickly debunked as illegitimate and, very probably, an effort to hype the stock for a quick buck. Jon Ogg reported on the mysterious offer on our sister site, BloggingBuyouts.

The stock jumped on the news of the offer, but quickly gave up all the gains and then some after media and analyst reports dismissed the offer. But anyone who jumped on the stock at the sight of the press release got burned.

How can you prevent this from happening to you? A good rule of thumb: When you're looking for information on material developments, look to the SEC filings. The offer was made solely through a press release -- something that anyone with a few hundred bucks to pay the wire fee could send into the hands of millions of investors in a few minutes. Until you see something about the "offer" in the SEC's Edgar Database, it should be regarded as a rumor. I wrote about a similarly non-materializing offer at Trans World Entertainment (NASDAQ: TWMC) back in November.

Another solution is to leave the "in-play" trading to the pros -- it's all about information and you're unlikely to have an edge. If you see a news item that a company has received an offer, don't jump in.

What exactly is a takeover rumor? Be skeptical originally appeared on BloggingStocks on Sun, 06 Jul 2008 15:10:00 EST. Please see our terms for use of feeds.

A private equity group unfamiliar to the stock market world claims to have made a bid to acquire struggling donut maker Krispy Kreme (NYSE:KKD). According to The Winston-Salem Journal, MGL Asset Management Group has offered $7.25 a share for the company, a premium of almost $2 a share over its closing price Monday.

The mystery surrounding MGL, its assets, ownership and ambitions have caused some to meet the proposal with skepticism. The company provides almost no information on its web site, and its spokesperson told the Journal that the bid was legit, but declined to elaborate.

The skepticism about this offer seems to stem from the wisdom and timing of such an acquisition. Although KKD just reported its first profitable quarter in over three years, overall, since selling in the $50 range before the carb craze, it has waffled ever since below the $10 mark, bottoming out at $2.50 a share just last November.

At a shareholder meeting recently, the CEO of Krispy Kreme reiterated the company's plans to build international business and increase the range of snack foods sold in convenience stores. Neither option, in my opinion, is likely to have a strong impact on the company's bottom line in the near future, if at all. One profitable quarter after three and a half years of losses in a company with a tired brand doesn't whet my appetite.

I wonder what drives MGL's interest? Perhaps they're looking at the hole picture, with a glazed look in their eyes.

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Equity firm dunking fund into Krispy Kreme originally appeared on BloggingStocks on Tue, 01 Jul 2008 11:01:00 EST. Please see our terms for use of feeds.