Elmo share price explodes 29% on possible takeover

Shares in Elmo Software were halted earlier today, before leaping higher when trading resumed late morning.

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Key points

  • The Elmo share price is up 29% on Thursday
  • The company revealed it has received approaches expressing interest in a possible acquisition
  • There is no certainty that any takeover offer will eventuate or be accepted

The Elmo Software Ltd (ASX: ELO) share price is rocketing on Thursday, up 29.7% to $3.125 per share.

Shares in the provider of cloud-based human resources and payroll software were halted for the first hour of trading today, but launched skyward when trading resumed just after 11am AEDT.

This follows on speculations surrounding a potential takeover offer of the ASX tech share.

What's all this about a potential acquisition?

The Elmo share price was frozen in early trade today at the company's request.

The company requested the pause due to recent media speculation regarding "possible corporate activity".

The ASX tech share hit the boards again after it released a statement regarding those speculations.

According to the release, Elmo "confirms that it has received approaches expressing interest in acquiring the company from various parties, including Accel-KKR".

Elmo said it's in discussions "with selected parties in the context of maximising shareholder value". Discussions which look to be driving the Elmo share price sharply higher today.

However, the company noted:

No agreement has been reached in relation to any transaction, and there is no certainty that any proposal received will result in a binding offer or that any such offer would be recommended to shareholders.

UBS and Arnold Bloch Leibler are advising the company regarding any proposals it receives.

Elmo share price snapshot

Despite today's surge, the Elmo share price has underperformed this year, down 32.7% since the opening bell on 4 January. That compares to a year-to-date loss of 13.6% posted by the All Ordinaries Index (ASX: XAO).

October, however, has presented a markedly different picture.

While the All Ordinaries is up 3% since the first day of trading this month, the Elmo share price has gained a whopping 41%.

In its 2022 financial year results, the company reported a 32% year-on-year increase in revenue. Though it still notched up a steep $79 million net loss for the year.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Elmo Software. The Motley Fool Australia has positions in and has recommended Elmo Software. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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