Evaluating the VeriSign Rumor Mill (VRSN)

VeriSign, Inc. (NASDAQ: VRSN) is up a second day in a row on strong volume after the company has cancelled two investor presentations.�� The hope is that there is some M&A development brewing as many have believed for years that the company would make an attractive buyout target.

The current speculation may be more around announcing a new CEO for the company.  By canceling both at ThinkEquity and at Citigroup, the rumor mongers came out on this one.  What is funny is that some companies cancel meetings due to negative developments as well.

VeriSign has head leadership gaps on and off in its history and the company lost its CEO Mark McLaughlin over the summer as he left to go run another tech outfit called Palo Alto Networks.  Founder and Chairman Jim Bidzos took the head job as CEO back over on an interim basis, as we saw back in 2008 when the company lost its prior CEO.

The Washington Business Journal reported today that the company is buying its new Reston headquarters for $118 million.  The report showed that the lease had only been signed a year ago and that it was a previous headquarters of Sallie Mae.

After the move today, VeriSign is up 9.4% at $35.07 and the market cap is just over $5.8 billion with a 52-week trading range of $27.65 to $37.73.  Stock option trading has been very active as well.

Thomson Reuters has a consensus price target objective of $40.40 today.  The consensus earnings targets are $1.46 EPS in 2011 and $1.82 EPS for 2012. A blended 2011-2012 forward P/E ratio of 21.6 is not exactly cheap for private equity and for technology valuations these days.

Shares closed at $30.01 before the Labor Day weekend and yesterday was a close of $32.06 on more than 11.6 million shares.  Even with almost two hours to go before the closing bell, there have been 11.1 million shares traded today.  The last time we saw a 10+ million shares day was December 15, 2010.

Another day, another would-be rumor.  We stress this caveat with each rumor out there that we hear, even when the rumors seem credible: Consider all market rumors as hearsay until you get an announcement from the companies.

JON C. OGG