Why Viasat Stock Soared Almost 19% Higher Today
Key Points
If consummated, such a deal would surely command a premium price.
This led to a wide and strong rally in satellite stocks.
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Thursday was a banner day for investors bullish on satellite stocks. A prominent company in the sector is apparently the focus of a concentrated acquisition effort, and this sparked a hot rally in such stocks Thursday. Viasat (NASDAQ: VSAT) was among the beneficiaries, closing the day almost 19% higher.
Hot like a rocket
That peer is Globalstar, and the company apparently interested in owning it is ubiquitous online retailer Amazon. That's according to an article published early Thursday morning in the widely read business newspaper, the Financial Times.
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The FT, citing unidentified "people familiar with the matter," said that Globalstar and Amazon have been in discussions for quite some time about an acquisition, which would provide significant lift for the latter's Leo satellite internet operation. No mention was made of how much Globalstar might be paid to become an asset of the monster retailer.
This is hardly the first time speculation has been rife that Globalstar is potentially for sale. Media reports late last year stated that it and Elon Musk's venture SpaceX -- which has considerable satellite assets -- were also in talks about an acquisition. Other companies were similarly rumored to have shown interest, although few were identified by name.
Neither Globalstar nor Amazon (nor SpaceX, for that matter) has yet commented on the FT's article.
Caution warranted
Viasat wasn't mentioned in the report, but that hardly mattered to investors suddenly developing an interest in the stock. After all, the market's logic is that if Amazon is apparently courting Globalstar so aggressively, any satellite company, no matter its size, has significant value waiting to be unlocked.
The FT is a reliable and trustworthy newspaper, but even if the story is 100% accurate, large-scale deals can be delicate and difficult to consummate (especially this one, as Apple has a chunky stake in Globalstar). After the monster rally in satellite titles on Thursday, I'd be wary of the sector for now, and that includes Viasat's stock.
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Eric Volkman has positions in Apple. The Motley Fool has positions in and recommends Amazon and Apple and is short shares of Apple. The Motley Fool has a disclosure policy.
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