Why Is Datto (MSP) Stock Up 20% Today?

Today, the three major stock indices are deeply in the red amid a broader market selloff. Investors are pricing in the impact of higher interest rates as inflation continues to surge. However, not all stocks are feeling the pain. Datto (NYSE:MSP) is one such winner in today’s market; MSP stock is up more than 20% in early afternoon trading.

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Of course, on a day like this, investors may rightly assume something is up. In this case, they’d be right. Today, the key driver behind Datto is news that the software maker will be taken private by security software company Kaseya for $6.2 billion.

As far as deals this year go, this is a relatively large transaction. Accordingly, the market looks to be paying close attention. Today, more than 30 times the average daily volume of MSP shares are trading hands — and we still have time left in the trading day.

So, let’s dive into why this transaction matters for investors.

The Deal That Has MSP Stock Soaring Today

Datto is a unique software company focused on security and cloud-based software. These solutions are aimed at small- and medium-sized businesses, like managed service providers.

Software security is an interesting space to be in right now. On the one hand, security concerns have been amplified by the geopolitical climate. On the other, however, inflation concerns and interest rates have hit valuations hard. Still, for certain investors and companies, this is a buying opportunity worth considering.

Kaseya appears to believe the current environment is prime for deal-making. Now its new deal, worth around $6.2 billion, also has the backing of a private equity group. Overall, investors in this space appear to be viewing the agreement as a positive, sending MSP stock toward the deal purchase price. According to the press release, “the deal offers $35.50 per share in cash to Datto shareholders.”

Looking forward, today’s stable trading of MSP stock suggests investors believe this deal also has a high likelihood of going through. In any case, the agreement represents a lot more for the security software space as a whole. I will be watching the sector closely moving forward.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.


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