from www.wsj.com – This may be the time for investors to put Playboy down.

Hugh Hefner’s $5.50-a-share offer for the shares outstanding in Playboy Enterprises looks generous, pitched 40% above Friday’s closing price and well above analysts’ valuations of around $4.

It is no secret the adult-entertainment business has seen better days, particularly those outlets reliant on old media. Playboy has suffered net losses of $211 million in the past two years on declining revenue.

But it remains very hard for outsiders to gauge the company’s true value. Recently appointed CEO Scott Flanders is in the midst of a turnaround, cutting costs and focusing on licensing for growth. It will be a while before investors get visibility on the whether that is working and what the long-term earnings prospects are.

It is reasonable to assume Mr. Hefner has a better idea. While no longer on the board, he still holds the executive position of chief creative officer and editor-in-chief and has a voting majority of the shares.

That said, there is no guarantee a deal will come through. Details about the arrangements between Mr. Hefner and his apparent backer, Rizvi Traverse Management, are skimpy. The bid would cost about $123 million, given that Mr. Hefner already owns about a third of the total stock.

There is always the possibility Mr. Hefner is trying to smoke out another bidder. Indeed, Penthouse’s owner has said it may make its own offer. The dream of a bidding war gives investors an incentive to hold out for more; indeed, Playboy stock quickly traded above the offer. But speculation of a deal last year came to nothing. Investors in the bunny brand, having enjoyed a welcome bounce, should sell.