TLDR
- Marvell Technology (MRVL) stock fell about 10% in premarket trading Thursday after Bloomberg reported advanced talks to buy Lumentum (LITE).
- Lumentum rose about 6%, and a deal could be announced as early as next week.
- Lumentumās $83 billion market value is large next to Marvellās $221 billion, which raises dilution worries.
- Bernstein says Marvell held only about $3.92 billion in cash last quarter.
- Alphabetās earnings miss and a falling Nasdaq added to the pressure.
Marvell Technology (MRVL) stock fell about 10% in premarket trading Thursday. Bloomberg reported the company is in advanced talks to buy Lumentum Holdings (LITE).
Marvell Technology, Inc., MRVL
Lumentum stock rose about 6% on the report. A deal could be announced as early as next week, according to the sources Bloomberg cited.
Neither company has confirmed anything. Marvell and Lumentum did not immediately respond to Barronās requests for comment.
Why Investors Are Reacting to the Price Tag
Lumentum had a market value of $82.79 billion at Wednesdayās close. Marvellās market value stood at $220.67 billion.
That is a big chunk of Marvellās size. Investors appear worried about dilution if the deal is paid for with new stock.
Bernstein analysts noted Marvell held about $3.92 billion in cash last quarter. That covers only a small part of what the deal would likely cost.
Any deal would probably need new equity, new debt, or a mix of both. Marvell has not said how it would pay.
Mizuho analyst Vijay Rakesh looked at past chip deals. Over the last 15 years, they carried an average 38% premium to the undisturbed stock price.
Applied here, that would put Lumentum above $1,260 a share. It closed Wednesday at $913.95.
Marvell has been on a buying run lately. Within the past year, it announced the purchase of Celestial AI for $3.25 billion and XConn for $540 million.
This deal would dwarf both. Going from small add-ons to a purchase this size is a big leap, and the market is not shy about saying so.
A Weak Morning for Tech
Alphabet reported third-quarter results after Wednesdayās close. It missed revenue and earnings estimates and posted negative free cash flow.
Nasdaq futures dropped overnight. The Nasdaq was down about 1.0% Thursday, while the S&P 500 was off 0.2%.
The Federal Reserve held its benchmark rate at 3.75% to 4.0% on Wednesday. That gave rate-sensitive stocks only modest relief.
The usual market reflex on a deal this size is to sell the buyer and buy the target. Thursday is following that script so far.
Analysts see the logic in adding Lumentumās high-speed optical technology to Marvellās AI lineup. For now, the cost is getting more attention than the strategy.
Marvell was down 9.7% in premarket trading Thursday, while Lumentum was up 6.0%, according to Barronās.
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