The handbag and accessory maker saw a share price dip of more than 14 percent to around $19.30 per share. The stock was on pace for its worst day since Aug. 3 when it lost 18.22 percent.
As the company mulls whether or not to accept the offer — or an offer from other interest parties, like Michael Kors — three anonymous sources told CNBC that a deal is likely to value the company at below its current trading price.
"If they had gotten the bid they wanted, they wouldn't be asking for more time," Simeon Siegel, retail analyst at Nomura Instinet, told CNBC.
With the day's moves, shares of Kate Spade are still up 5 percent so far this year.