Stock Takes: Pumpkin Patch stock comes off the boil

Investors were reacting to Pumpkin Patch's disclosure on Friday that unnamed third parties had expressed an interest in the retailer. Photo / Dean Purcell

Pumpkin Patch shares came off the boil yesterday, ending a three-day rally that had been prompted by the struggling retailer's flagging of the potential for a takeover.

The children's clothing seller's stock closed down 9.7 per cent at 28c last night. Trading was relatively light, with almost 28,000 shares changing hands in 11 trades.

It was a sharp reversal from the previous three trading days, when the retailer's shares gained close to 50 per cent, rising from 21c to 31c.

Investors were reacting to Pumpkin Patch's disclosure on Friday that unnamed third parties had expressed an interest in the retailer and its board was seeking formal proposals around either an acquisition or recapitalisation.

Yesterday's sellers could well have been profit-taking speculators.

Maybe some long-suffering shareholders decided it was time to cut their losses and get out.

Chairman Peter Schuyt on Monday tried to dampen market enthusiasm about a potential takeover, saying no conclusions should be drawn on whether a transaction would take place or what value any deal might offer.

A source said yesterday private equity firms as well as players from the retail trade were rumoured to be circling Pumpkin Patch.

There's also talk in the market that Friday's revelations were a cry for help by the company, which is facing a tough outlook as a result of many challenges, including online competition and high levels of margin-sapping promotional activity.