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Why Harmonic, Inc. Shares Popped Today

By Evan Niu, CFA – Sep 28, 2016 at 12:15PM

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Harmonic and Comcast get even cozier.

Image source: Comcast.

What happened

Harmonic, Inc. (HLIT -2.46%) shares have kicked off Wednesday morning with a bang, jumping 20% as of 11:30 a.m. EDT after the company announced a warrant agreement with cable giant Comcast (CMCSA -2.34%).

So what

The agreement allows Comcast to acquire Harmonic shares dependent upon various performance metrics, such as product sales. Harmonic CEO Patrick Harshman called the deal "significant validation" and showed that Harmonic's existing relationship with Comcast is only getting stronger. Harmonic specializes in video delivery infrastructure and cable delivery.

Now what

More specifically, the agreement grants Comcast the ability to purchase up to 7.8 million shares of Harmonic at an exercise price of $4.76, which was the weighted average share price for the past 10 days. The warrants are subject to vesting conditions that are based on pricing elections, completion of field trials, and other payments between the two companies. For instance, Comcast must agree to pay enterprise pricing for Harmonic's CableOS software.

Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Harmonic Inc. Stock Quote
Harmonic Inc.
HLIT
$12.68 (-2.46%) $0.32
Comcast Corporation Stock Quote
Comcast Corporation
CMCSA
$30.43 (-2.34%) $0.73

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