Why JFrog Stock Flew Nearly 5% Higher on Friday

On the last trading day of the week, investors traded on rumor rather than hard news about software tools specialist JFrog (NASDAQ: FROG). After a media report stated that several potential acquirers are circling around the company, market players bid the shares up by just under 5% on the day. That performance trounced the 0.8% increase of the benchmark S&P 500 index.

A report says potential suitors are sniffing around

In an article originally published before market open, Bloomberg wrote that JFrog is being considered for buyout offers from several private equity firms. Citing unnamed "people with knowledge of the matter," the financial news agency added that these entities include Permira and Hellman & Friedman.

So far, this interest has been expressed in a series of what Bloomberg described as "early looks" at the highly specialized tech company. The article's sources said that these are not guaranteed to lead to a buyout.

The report quoted an unidentified company spokesperson as saying that JFrog "is not in discussions with any private equity or financial advisor regarding mergers and acquisitions at this time."

Furthermore, "it is not JFrog's practice to comment on industry rumors and speculation," the spokesperson added.

Bloomberg also reached out to the two named private equity firms, but both declined to comment.

Buyer beware

JFrog is slated to publish its third-quarter results in a matter of weeks (on Thursday, Nov. 7, after market close). Its performance will surely have an impact on the apparently developing takeover story. Until we get more concrete information about a potential buyout, however, market players should exercise caution with this stock -- as of now, the potential for a deal is only speculation.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends JFrog. The Motley Fool has a disclosure policy.