Among the small-cap stocks most in focus today, Terran Orbital (NYSE:LLAP) stock is unfortunately making headlines for the wrong reasons. Indeed, LLAP stock’s decline of nearly 30% today signals the gravity of the news. More specifically, company management is reportedly looking to sell Terran Orbital to the highest bidder.
According to The Wall Street Journal, the company reportedly plans to pursue a bidding process which is expected to take place this month. So, it’s possible that Terran could be sold before the end of the year, making LLAP stock an intriguing one for investors to try to value ahead of any potential suitors.
Let’s dive into what to make of today’s news — and whether LLAP may be undervalued, considering the extent of today’s decline.
LLAP Stock Plunges on Sale News
Whenever a company advertises that it’s for sale, things get interesting. In many cases, outside companies assessing tuck-in acquisitions may become cautious with smaller companies looking for buyers. Typically, M&A teams like to have a handle on who could be bidding and, while the buyer pool may be small for a satellite maker like Terran, the amount of interest and the size of the bidder pool remains unknown.
For value investors looking to model out what Terran and LLAP stock are worth, this could be a fun exercise. If more than one bidder step up to the plate, it will be interesting to see how high buyers will go to acquire the company’s assets. While the space sector may be temporarily out of favor, it’s true that private companies (in the satellite space in particular) have become integral to many technologies. Thus, I wouldn’t be surprised to see significant interest build in a company like Terran.
We’ll have to see who exactly steps up to the plate — and whether the market is ultimately correct in downgrading shares on this news. Personally, I think a sale could be the right move from the company’s management team, in terms of maximizing value for existing shareholders. If the right partner steps up, investors in Terran could have a smaller piece of a bigger defense or corporate space player. That could be the best outcome for everyone.
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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.