Why Iridium Stock Soared by 22% This Week
Key Points
This is Globalstar, which has agreed to be acquired by Amazon.
The deal enhances the value of companies that operate satellite networks.
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Investors haven't been able to get enough of satellite stocks lately, and Iridium Communications (NASDAQ: IRDM) is benefiting handsomely from this. The major catalyst was a peer agreeing to be acquired by a famous, deep-pocketed company.
That meant a fine week for Iridium shareholders. Their stock rose by more than 22% over the period, according to data compiled by S&P Global Market Intelligence.
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A big deal in space
Iridium's peer in question is Globalstar, which landed prominently in the financial headlines on Tuesday after it signed a deal to be acquired by the always-ambitious Amazon. The cash-and-stock transaction is valued at more than $11 billion.
Image source: Getty Images.
The deal puts a valuable asset in Amazon's pocket, as the company will add Globalstar's direct-to-device services to Amazon Leo, its low Earth orbit satellite network.
Not surprisingly, Globalstar's stock and Iridium's both popped on the news. After all, the transaction heightened the value of the few existing satellite networks operated by publicly traded companies, and Iridium has operated its network for many years.
Knock-on effects
I predict that we'll see much more coverage of satellite companies, and hence potential interest from other would-be acquirers with bulging coffers. Satellite networks have been valuable in the telecom and defense industries for a long time, and that value is likely to grow if and when artificial intelligence (AI)-ready data centers are floated in space -- a hot idea in both the space and tech industries now.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.
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