Over the past week, one of the more interesting movers we’ve been watching closely is Exela Technologies (NASDAQ:XELA). Today, this software solutions company is in focus again, as XELA stock gains approximately 25%. This move appears to be tied to last week’s announced receipt of an acquisition proposal, which spurred significant investor interest.
Notably, following Wednesday’s 10% pop, shares of XELA stock settled down. However, with the broader stock market rallying today, investors finally have the green light to price in some good news.
Indeed, it’s been a rather difficult few weeks for tech stocks in general. Volatility has been mostly to the downside, with concerns around rate hikes hitting growth stocks particularly hard. That said, with recent commentary from three Federal Reserve officials signaling a 100-basis-point move may not be in the cards, investors appear to be settling down and moving away from extreme fear.
Let’s dive into what this could mean for Exela moving forward.
Is XELA Stock a Buy on Acquisition Proposal?
It’s worth noting that the acquisition proposal Exela received wasn’t for the entire company. Rather, this proposed offer would see a $200-million-revenue business unit of Exela acquired at an undetermined price. Accordingly, investors really don’t have many details to analyze what this could mean for XELA.
That said, the prospective options resulting from a strategic review have no doubt led to this offer. Exela is looking to bolster its balance sheet via paying down debt and reducing its annual interest expense. A divestiture is one simple way the company can accomplish these goals.
However, many unknowns, including which division is seeing interest, and how this might impact Exela’s cash flows moving forward, had clearly perturbed investors. Today’s rally is nice, but many may want to see the details of this deal before jumping on the momentum bandwagon.
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On the date of publication, Chris MacDonald did not have (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.