What Happened:
Shares of real estate focused virtual reality platform Matterport (NASDAQ:MTTR) jumped 179% in the morning session after CoStar Group announced it has agreed to acquire all outstanding shares of the company (Matterport) in a cash and stock deal valued at $5.50 per share ($1.6 billion of enterprise value). Under the terms of the agreement, Matterport stockholders will receive $2.75 in cash and $2.75 in shares of CoStar Group for each share of Matterport common stock. CEO and founder of CoStar Andy Florance added "CoStar Group and Matterport have nearly identical mission statements of digitizing the world's real estate. I look forward to welcoming Matterport to the CoStar Group family and believe that we will be stronger together, in pursuit of our common mission."
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What is the market telling us:
Matterport's shares are very volatile and over the last year have had 41 moves greater than 5%. But moves this big are very rare even for Matterport and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 2 months ago, when the stock dropped 15.7% on the news that the company reported fourth-quarter results with revenue falling below Walling Street's expectations, as top-line growth continued to decelerate. Revenue guidance for next quarter also missed analysts' expectations. Lastly, the company continued to burn cash, which isn't attractive as markets continued to prioritize cash-generating businesses with healthy balance sheet that can withstand potential economic downturn. With Matterport catering largely to the real estate market, the industry headwinds witnessed in 2023 continued to impact the business. The company highlighted a "19% decline in U.S. home sales and elevated interest rates." which continued to create a challenging operating environment with full-year revenue guidance indicating further growth decelerating as the outlook implied FY'2024 top-line growth of 12.8% (vs. 18.8% in FY2023). Overall, this was a weaker quarter for Matterport.
Matterport is up 84.9% since the beginning of the year. Investors who bought $1,000 worth of Matterport's shares at the IPO in February 2021 would now be looking at an investment worth $445.12.
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