Do debt free/cash rich companies tend to be bought out?

Question

Especially when the stock is cheap, say, under $10?

Answer 1

This was very typical reasons why we saw many leverage buyouts (LBOs). However, the one problem you have here is assuming that a stock under $10 is cheap. Just because the cost per share doesn't mean that the the company is cheap. You should be sure to check into why the company sells for such a cheap dollar amount. Is the stock on discount or is it a stock with not much of a future. What is the value of the future cash flows. Other reasons would be that there are a large number of stocks. Look to see what the book to equity value is this can be a first step but not the only way that you should value a stock.