The Plot Thickens: Fred's Wins A Big Investor

Fred's, Inc. (NASDAQ: FRED), a relatively small discount stores and full service pharmacies retailer, shocked investors earlier this week when it announced a blockbuster deal to buy about 800 new retail locations from Walgreens Boots Alliance Inc (NASDAQ: WBA) and Rite Aid Corporation (NYSE: RAD).

Fred's stock soared more than 80 percent on Tuesday, and after a brief breather, shares of Fred's were trading higher by more than 6 percent early Friday morning after the Wall Street Journal reported that Alden Global Capital amassed a 25 percent stake in Fred's.

The Wall Street Journal reported that the relatively small activist investment firm has been quietly building up a stake in Fred's and continued to amass its stake even after this week's 81 percent.

The firm paid $158 million for its entire stake and is now worth $180 million, excluding Friday's pre-market gains.

The activist investor's position remains unchanged after Tuesday's deal and believes the stock is still undervalued. Alden now hopes to talk with Fred's management team about the deal, capital allocation and its board of directors.

Of particular note, Alden's 25 percent stake is unusual for an activist investor who typically don't amass a stake of more than 10 percent before disclosing their position to the public.

Image Credit: By Michael Rivera - Own work, CC BY-SA 3.0, Wikimedia Commons