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An unidentified customer walks out of a Rona store in Toronto's east end, Feb. 22, 2012.

Chris Young for The Globe and Mail/chris young The Globe and Mail

I don't blame CEOs for being overly cautious with their words these days. If they utter even the smallest hint of negativity, or of a takeover, or of a strategic review, the market can move wildly.

For proof, look no further than what played out yesterday between Rona Inc. and Lowe's Cos. Inc. When speaking to a reporter, Robert Hull, Lowe's chief financial officer, said he was open to "all options" after being asked if he would be interested in buying Rona. Even though Rona isn't on the market, and even though the CFO didn't say much else, in almost no time Rona's stock popped 13 per cent. The Quebec-based company has since had to come out with a formal statement to confirm that it isn't for sale.

Of course, there's more to the story than this. There has long been chatter that Lowe's should buy Rona because the U.S. rival doesn't have any stores in Quebec, and both firms have been battered by a slow recovery coming out of the recession. So there's some history. But what took place yesterday is happening too often.

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Just look at what transpired after Research in Motion Ltd. chief executive officer Thorsten Heins announced that RIM is launching a comprehensive strategic review during its quarterly earnings conference call. Very quickly, it got spun into a story about RIM being open to a takeover.

But if you actually look at what Mr. Heins said, he made it very clear that he doesn't want to sell. "I and my team and also the board truly believe that the best path for RIM is to manage the turnaround," he said, adding that selling is "not the main direction we are pursuing right now."

No doubt, the media must understand that we are, in part, convincing people to jump at the rumours. We like short headlines because they attract eyeballs, and eyeballs translate in more clicks. "RIM hints at takeover" is much sexier than "RIM mentions takeover possibility, but admits it is very unlikely."

Ultimately, though, shareholders must do their homework. Right now, too many are taking the easy bait. And everyone must understand that when stocks pop on these rumours, many of the buyers are merger arbitrage types who love playing the takeover spread.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More

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