Research In Motion on the Rumor Mill

 | Oct 07, 2011 | 7:45 AM EDT
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Last week, Bloomberg reported that activist investor Carl Icahn was taking a stake in BlackBerry smartphone maker Research In Motion (RIMM). It seems like an odd thing to do if he was thinking of buying RIMM shares, as it jacked up the price immediately. If Icahn was going to buy, wouldn't it have been better to buy the shares and then disclose it later, as Third Point's Dan Loeb did a few weeks ago with Yahoo! (YHOO)?

On the other hand, maybe Icahn was sending up a flare to see what kind of response came back from the market. Perhaps it's part of an elaborate plan to buy in in a few weeks, when the stock comes back down to earth after the speculation subsides (assuming he's the guy who planted the Bloomberg story in the first place -- through a friend, of course).

The stock jumped Tuesday, presumably on speculation that RIMM had hired investment bankers to shop the company. But RIMM never confirmed the rumors and the shares tanked that afternoon.

On Wednesday morning, a report in the Independent overnight seemed to juice RIMM shares again on hopes that Vodafone Group (VOD) might buy the Canadian company. Vodafone?  Really? That's like saying Sprint (S) is going to buy Palm from Hewlett-Packard (HPQ). Why would they do that?

Throughout the day, I heard media reports of other names that were interested in RIMM, like HTC and Microsoft (MSFT), and I wondered where all these rumors started.

What seems to be happening is RIMM is very oversold. It's down 59% year to date and 8% of its shares are being held short as of the middle of last month. The action suggests to me that a bunch of hedge funds are spinning stories to create quick pops in the stock. Who knows, maybe they will move on to H-P next week.

Activist investors may very well be looking at getting into RIMM. There is also the possibility of a buyer waiting in the wings. The bulls' arguments for RIMM do have some merit. But I don't think the way these rumors have come out in the past few days suggests that something is going to happen.

So, this seems like a good time to take profits if you're long RIMM.

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