NEW YORK (CNN/Money) - Circuit City Stores Inc. said Tuesday it received a $3.2 billion takeover offer from a Massachusetts investment firm -- news that sent its stock soaring.

The No. 2 electronics retailer said its board will carefully evaluate the $17-a-share offer from Highfields Capital Management, a Boston-based money management firm that already owns about 6.7 percent of Circuit City's outstanding stock.

Shares of Circuit City (up $2.35 to $16.58, Research) initially surged above the price Highfields offered as investors bet a bidding war might erupt, but later the stock fell back below $17, though it was still up about 16 percent on the day.

Bill Armstrong, an analyst at C.L. King & Associates, said the stock's quick rise suggested other private investment firms might join the bidding, according to Reuters.

Highfields' offer price represents "roughly a fair market valuation of the company," said Richard Weinhart, retail analyst at Harris Nesbitt. But, "it is possible that Highfields will have to raise the bid or there could be other financial buyers that may be interested," he added.

But Alan Rifkin, an analyst at Lehman Brothers, said in a research note that fundamentals at Circuit City did not justify a higher stock price, according to Reuters.

For the past four years, Circuit City's sales and earnings have suffered as the company struggled against rival Best Buy (up $0.69 to $55.37, Research).

Industry analysts have cited poor store locations, staffing problems and stiff competition. The chain has posted losses in each of the last three quarters.

In its letter, Highfields suggested it would be good for Circuit City to go private and avoid the scrutiny that comes with being a public company.

Highfields said the deal would "eliminate the public company transparency" which it said was "uniquely damaging in a highly competitive industry where Circuit City is going head-to-head with a tough and entrenched rival."

Last year, the Richmond, Va.-based company said its board voted to terminate its shareholder rights plan, a measure typically used to make it dramatically more expensive for a company to be acquired.

Circuit City has retained Goldman Sachs as an adviser.