There’s nothing quite like a takeover rumor to boost a company’s stock price. Just ask Papa Johns.
Stock in the pizza chain, which is based both in Atlanta and Louisville, Kentucky, has taken off this week following a report in the publication Semafor that an investment fund backed by the Qatar royal family is considering a bid.
Irth Capital Management revealed that it had acquired 1.6 million shares of the pizza chain, or just less than 5% of the company’s stock, according to a federal securities filing.
Papa Johns shares were up more than 18% in morning trading. They are up more than 32% over the past week.
A takeover bid for the pizza chain makes sense considering the state of its shares. Papa Johns stock had lost more than half of its value over the past year, before the rumor-fueled run-up in shares started.
Same-store sales at the chain declined as much as 6% last year after a shift from local to more national marketing did not worked as planned.
In addition, the chain—like much of the pizza business—is losing delivery share to third-party aggregators, requiring them to target either carryout customers or customers who order their pizza through one of those aggregation apps.
Papa Johns has yet to comment for this story.
Stephens analyst Jim Salera said in a note on Thursday that takeover rumors “could have been the primary driver” of the stock price increase before news of the potential bid broke. But Salera also noted that January credit card data suggests some sequential sales improvement in January.
Salera noted that Irth does have some track record in the restaurant and retail spaces.
Franchises appear to be in relatively high demand right now, thanks largely to a more profitable model that shifts most of the risk and financing responsibilities to franchisees. Tropical Smoothie Café and Rita’s Italian Ice were both sold last year and Jersey Mike’s is finalizing its sale.
Freddy’s Frozen Custard, Crumbl and Dave’s Hot Chicken are all reportedly on the market. The same is true for the 230-unit franchised hot dog concept Nathan’s, according to the publication Financial Times. Though that business is more about the sale of hot dogs at grocery stores and retailers.
UPDATE: This story has been updated to include additional information.
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