Investors drove up shares of Martha Stewart Living Omnimedia 13 percent yesterday on word that her legal woes were a step closer to being resolved.
MSO shares rose $1 to close at $8.50, and even hit $9 at one point.
Stewart is under a federal investigation for her possible involvement in the ImClone insider trading scandal.
News surfaced Monday that Stewart was served with a Wells notice, confirming that the fedswere likely to bring civil charges against her. After months of speculation, investors turned optimistic on the actual news.
“The investor community has believed there is some wrongdoing Martha could want to ‘fess up to. This is a step toward resolving that,” said Laura Richardson, analyst at Adams, Harkness, Hill.
“It’s possible the market was braced for a federal indictment,” said Doug Arthur, analyst at Morgan Stanley. “A civil charge suggests there’s room for negotiation. On the surface it does not look as draconian as was expected.”
Arthur believes this could be a turn in the tide for Martha – and MSO.
“The business is holding up well, and the suggestion that she may be able to settle this” is good news, he said. “Unless there’s a smoking gun, this looks like a weak case. The civil charge may have been interpreted as a way out here.”
Adams, Harkness, Hill’s Richardson agrees the company is surviving nicely.
“Even if the worst-case scenario played out, there’s still a business there,” she said.