Pearson shares closed 20% up on Friday: what fuelled the stock?

Image for Pearson swings to a loss

Pearson plc (LON: PSON) shares closed roughly 20% up on Friday after the British multinational rejected a £7.0 billion ($9.16 billion) takeover proposal from Apollo Global Management Inc.

Apollo’s offer translated to 854.2 pence a share

According to Pearson, the private equity firm’s 854.2 pence a share offer significantly undervalued it. The publishing and education company said in a statement:

The offer significantly undervalued the company and its future prospects. The Board is confident that the lifelong learning strategy set out in March 2021 will create sustainable, long-term value for Pearson shareholders.

Pearson’s board has unanimously rejected the bid. Trading at a PE multiple of 37.10, PSON is now up more than 30% for the year. The consensus rating on Pearson currently is “hold”.

Pearson’s profit was up 33% in its recent fiscal year

Today’s disclosure marks the second time Pearson has rejected a proposal from Apollo, the previous one being for 800 pence a share in November.

CEO Andy Bird is committed to turning Pearson into a digital-first platform. Last year, the British company launched Pearson Plus that Bird sees as similar to Spotify. The subscription platform offers access to textbooks and related materials for $14.99 per month.

Pearson reported its preliminary full-year financial results last month. The report showed significant improvement, including a 33% YoY growth in adjusted operating profit.

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