Fairfax media is speculating as to why education provider Vocation Ltd's (ASX: VET) shares have jumped by around 40% since December 11, from a low of around 16 cents to as high as 29 cents.
Shares in Vocation are currently trading at around 26 cents.
Source: Commsec
Fairfax reports that there are various theories including that 15% shareholder Brett Whitford is lining up support to help him take control of the company. Mr Whitford was given the heave-ho in June.
The newspaper also reports that substantial shareholder notices from Mayfair Management, which now holds 6.7% of the stock, have come as a surprise. Mayfair may or may not be associated with entities that may be looking to take over the embattled education provider.
But investors can ignore all those theories.
Here's the real reason shares in Vocation have jumped so high so quickly. In that article, our own Bruce Jackson nominated Vocation as one of the "dirt cheap" stocks on his radar. Bruce says, "Vocation epitomises the terms 'dirty value, special situation and distressed investing'."
And he notes, "Vocation is priced for bankruptcy, something that's unlikely given the company's balance sheet. Reversion to the mean could see the shares multi-bag from these low levels."
Clearly, other value investors have spotted the opportunity – Renaissance Smaller Companies Ltd has also increased its holding to 9.9%.
As usual, it seems the market has overreacted, plunging Vocation's shares to ridiculous levels. Despite the recent share price rise, there may still be an opportunity in the education provider at around 26 cents.
