IAC's (IAC) proposal to acquire the remaining shares of MGM Resorts International (MGM) could create potential value upside if completed, though the bid may also reflect a broader valuation disconnect in MGM shares and raise questions around strategic intent, Truist Securities said Monday.

The brokerage said it views the announcement with "cautious optimism" for IAC, noting that bringing MGM fully under its ownership and control could improve operations and reduce investor scrutiny, while also addressing a common investor concern around indirect exposure to MGM through IAC.

At the same time, Truist questioned whether the proposal represents a shift in strategy or simply takes advantage of valuation dislocation, given IAC's long-standing ownership stake and board involvement in MGM.

"IAC has been an active shareholder and board member for many years now, which makes us wonder whether this bid has to do with changing anything fundamental or just taking advantage of valuation dislocation," the brokerage said.

Truist maintained its buy rating and $55 price target on MGM.

Shares of MGM were up more than 17% in Monday afternoon trading.

Price: 51.29, Change: +7.62, Percent Change: +17.45