What Happened:
Shares of cloud infrastructure automation platform HashiCorp jumped 10% in the afternoon session after Bloomberg reported that tech giant IBM is closing a deal to acquire the company for about $35 per share. According to sources, a deal could be struck between IBM and HashiCorp as soon as Wednesday, April 24, 2024. This corroborated the report on Tuesday, April 23, 20224, as HCP's stock rallied 20%, after the Wall Street Journal reported on a potential deal with IBM. In a related event, BTIG analyst downgraded HashiCorp from Buy to Neutral, adding, "Given that there is still some uncertainty on a deal being consummated and a typical approval/closing process in the six to nine-month range, BTIG sees limited incremental upside to shares near term."
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What is the market telling us:
HashiCorp's shares are very volatile and over the last year have had 19 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 11 months ago, when the stock dropped 25.6% on the news that the company reported first quarter results that beat analysts' revenue, remaining performance obligations (RPO, a leading indicator of revenue), and earnings per share (EPS) estimates. Cash position improved with operating cash flow at nearly breakeven. However guidance was weak and a major driver of the stock move. Revenue guidance for the next quarter missed Consensus. The full-year guidance was lowered, which is never a good sign and could imply company-specific challenges or lack of visibility around near-term fundamentals. Non-GAAP operating loss guidance was roughly inline. Management highlighted a weaker macro environment and " pressure in the buying process." HashiCorp also announced cost-saving measures and a headcount reduction of about 8%. Overall, it was a fine quarter for the company but underwhelming guidance was the focus.
HashiCorp is up 38.6% since the beginning of the year, but at $31.70 per share it is still trading 10.7% below its 52-week high of $35.49 from June 2023. Investors who bought $1,000 worth of HashiCorp's shares at the IPO in December 2021 would now be looking at an investment worth $371.87.
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