Jefferies Financial Rallies On Takeover Talk Ahead Of Earnings

Jefferies Financial stock rallied early Tuesday on reports that Japan-based Sumitomo Mitsui Financial (SMFG) is preparing for a potential buyout of the U.S. investment bank. The news comes ahead of Jefferies’ earnings report late Wednesday.

SMFG, Japan’s second-largest bank in terms of assets, is working on plans for a possible takeover of Jefferies Financial Group (JEF), the Financial Times first reported Tuesday citing unnamed sources.

				    ↑
					X

This video file cannot be played.(Error Code: 102630)

								Stocks Jump, Oil Dives On Iran Hopes; Rush Street, Nextpower, Peabody Energy In Focus
							

							

								See All Videos
							

						

					
					
						NOW PLAYING
						Stocks Jump, Oil Dives On Iran Hopes; Rush Street, Nextpower, Peabody Energy In Focus

SMFG last year increased its economic stake in Jefferies to 20%, but owns less than a 5% voting interest, according to the release. The Japanese bank first entered a strategic agreement with Jefferies in 2021, taking a 4.9% stake at the time.

Jefferies Earnings On Deck

Meanwhile, Jefferies reports Q1 results late Wednesday.

FactSet expects earnings to increase 56% to 89 cents per share on 24% revenue growth to $1.98 billion.

Analysts predict a nearly 30% increase in investment banking and capital management revenue. Asset management revenue is expected to decline about 6%.

BMO Capital analyst Brennan Hawken on Monday cut its price target on JEF stock to 42 from 68, TheFly reported. Hawken expected investors to focus on the Market Financial Solutions fraud allegations and the widening First Brands saga. Persistent negative press around those situations could present potential risks, such as the lost business and pipeline disruptions, Hawken added.

BMO Capital kept a market perform rating on the shares.

MFS, First Brands Impacts

Market Financial Solutions, the U.K.-based mortgage lender, went under in late February after discovery of a $1.8 billion shortfall.  Creditors of MFS allege the lender double-pledged its assets by using single properties to secure multiple loans and improperly diverted loan repayments, among other fraud allegations.

In addition, auto parts supplier First Brands filed for Chapter 11 bankruptcy in September. The Department of Justice in January alleged First Brands’ founder engaged in a multibillion-dollar fraud scheme that included invoice inflation, falsified financial statements and double-pledged collateral.

Jefferies reportedly had £103 million ($138 million) in exposure to MFS. The bank during its Q4 report said it expects to take a $30 million hit from its Point Bonita fund, which held $715 million in First Brands debt.

Meanwhile, First Brands founder Patrick James in court in January claimed Jefferies played a “central role” in the financing agreements under scrutiny.

Jefferies Stock Jumps

JEF stock rallied 8% early Tuesday. If the move holds, shares will rebound above their 21-day exponential moving average.

Jefferies the past two weeks rebounded modestly from their 2026 lows. Still, JEF stock has tumbled more than 36% this year as its downtrend accelerated in January amid the MFS and First Brands sagas.

You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison.

YOU MAY ALSO LIKE:

Join IBD Live And Learn Top Chart Reading And Trading Techniques From Pros

Learn How To Time The Market With IBD’s ETF Market Strategy

IBD Digital: Unlock IBD’s Premium Stock Lists, Tools And Analysis Today

How To Invest: Rules For When To Buy And Sell Stocks In Bull And Bear Markets