Heres Why Penn Virginia Corporations Stock is Reversing Course Today

By Markets Fool.com

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What: Penn Virginia Corporation's stock sank about 10% at one point on Monday after The Wall Street Journal quashed rumors that BPoffered to acquire the company for $8 per share. It was a rumored deal that Penn Virginia was also said to have rejected, instead seeking $10 per share in a buyout.

So what: While Penn Virginia is known to be on the auction block, the rumored deal with BP never made any sense. It was just too small of a company to move the needle for BP as it's less than 1% of the size of BP at the moment. Further, as The Journal pointed out in its rebuttal, last week's report was apparently fueled by still-online documentation of a takeover approach by BP Capital in 2002. However, that BP Capital isn't related to the British oil giant, but instead is a fund run by billionaire oilman T. Boone Pickens. Incidentally, that original offer was disclosed exactly 13 years to the day that the BP offer rumors surfaced in an online publication in the U.K.

Now what: The whole ordeal sent Penn Virginia's stock on a wild ride. Over the past five days the stock has been up as much as 30%, though with today's drop the stock is only up about 15%. That said, even that gain is based on what are now totally baseless rumors. While the company is open to a sale, as a result of two major investors pushing it to sell, no deal appears to be in the works and a deal might never materialize.

Further, this incident is a good reminder of why trading around rumors can be so harmful to investors. Investors that piled into the stock on hopes of a quick gain are seeing their investment incinerated today as the truth is coming out. It's why we always take the long-term view here at The Fool and don't buy into rumors.

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The article Heres Why Penn Virginia Corporations Stock is Reversing Course Today originally appeared on Fool.com.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.