Susquehanna Financial Group lowered its rating on The Finish Line to “Neutral” from “Positive” because the stock’s recent spike in price now “fairly reflects the probability of a takeout by Sports Direct.”
On September 13, Susquehanna analyst Sam Poser upgraded his rating on the stock to “Positive” and raised his price target from $9 to $12. At the time, he said Finish Line’s adoption of a poison pill would likely lead to an acquisition by Sports Direct.
On Monday, October 2, in lowering his view to “Neutral,” Poser noted that shares of Finish Line had surpassed his $12 price target late last week. On Monday, shares of The Finish Line closed at $11.58, down 45 cents.
Speculation on Sports Direct possibly acquiring Finish Line have arrived as regulatory filings show that Sports Direct holds a 7.91 percent direct stake in Finish Line as well as total economic interest was 29.57 percent, with the balance held through contracts for difference (CFDs). Sports Direct earlier this year acquired Eastern Mountain Outfitters and Bob’s Stores out of bankruptcy proceedings for about $101 million to mark its entry in the U.S.
In the Monday note, Poser noted that The New York Post last Thursday reported that Finish Line was in talks to be bought by Sports Direct. Poser wrote, “We believe that the report is accurate.”
He noted that Finish Line continues to struggle and faces challenges competing against Foot Locker in malls. He also said that besides its acquisition of shares of options, Sports Direct has “core business competencies, and aspirations to enter the U.S. market lead us to believe a deal is probable.”
Photo courtesy Finish Line
