The Spotless Group Holdings Ltd (ASX: SPO) share price has surged 19% higher in just two weeks as a prominent US hedge fund has been slowly buying up its shares.
What's been happening to Spotless?
New York-based hedge fund Coltrane Asset Management has been slowly accumulating Spotless shares and now owns nearly 12% of the company's total stock.
The Spotless share price has been pumped up accordingly, as its rocketed 12.5% in just the last week to $1.80 per share at yesterday's close.
Coltrane has held a decent chunk of Spotless since May 2017 when it acquired 10.7% of the services company, but yesterday's ASX substantial shareholder notice announced that it has since boosted its total holdings up to 11.6% at the time of writing.
Notably, Coltrane was one of only a handful of Spotless investors that refused to accept Downer EDI Limited's (ASX: DOW) $1.15 per share takeover offer for Spotless back in April 2017.
Spotless's share price remained broadly unchanged at that $1.15 per share valuation for the best part of 18 months until August last year, and has since climbed 56.5% higher in part due to Coltrane's accumulation.
Downer is no doubt keen to take Spotless private but this latest build-up from Coltrane could throw a spanner in the works, or alternatively leave the hedge fund with significant illiquidity risk if Downer is able to take Spotless off-market regardless.
With a P/E multiple of 24x earnings I'm not sure I could justify buying Spotless at its current share price, given the significant takeover risk that remains from all interested parties.
I'm personally not in the game of betting on takeover activity, nor potential regulatory outcomes, which means I'd be steering clear of Spotless and looking at the likes of Air New Zealand Ltd (ASX: AIZ) or Altium Ltd (ASX: ALU) in the meantime.
For those who are similarly unconvinced of Spotless' value, it's worth checking out this top-rated growth stock in a booming $22 billion industry that could be set to surge in 2019.
