Please ensure Javascript is enabled for purposes of website accessibility

Why Silver Spring Networks, Inc. Stock Popped 27.7% in September

By Steve Symington - Updated Oct 2, 2017 at 10:19PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The smart-grid products specialist agreed to be acquired. Here's what investors need to know.

What happened

Shares of Silver Spring Networks Inc. (NYSE: SSNI) rose 27.7% in September, according to data from S&P Global Market Intelligence, after the smart-grid products company agreed to be acquired by Itron Inc. (ITRI -0.10%).

More specifically, on Sept. 18, 2017, Silver Spring Networks stock soared after it announced a deal to be purchased by Itron for $16.25 per share in cash -- a 25% premium to its closing price the previous trading day -- valuing the company at $830 million (net of its $118 million in cash).

Stock market prices on an LED screen

Image source: Getty Images.

So what

Silver Spring Networks CEO Mike Bell added, "This strong combination will address end-to-end solutions for our customers and will create immediate value for our stockholders; it will also provide new opportunities for our employees as part of a larger, global technology leader for the Internet of Important Things."

The purchase should also help Itron drive growth through recurring revenue, according to Itron CEO Philip Mezey, while at the same time increasing "profitability beyond [Itron's] mid-teens EBITDA margin target."

Itron, for its part, expects the deal to be accretive to both adjusted earnings per share and adjusted EBITDA by 2019. It should also result in roughly $50 million in annualized synergies within three years of its closing date, which is currently expected to be later this year or early in calendar year 2018, pending regulatory and shareholder approval. 

Now what

That said, shareholder approval may not be a given, as a number of law firms have already announced investigations into whether Silver Spring Networks breached its fiduciary duty to shareholders by selling the company at too low a price. After all, as I pointed out last month, Silver Spring had a rough start to 2017 and was down 5% year to date leading up to the acquisition announcement.

In any case, I tend to want to give management the benefit of the doubt with regard to what's best for shareholders over the long term, and I suspect the aforementioned investigations will do little to prevent the deal from closing. With Silver Spring Networks stock trading at almost exactly the acquisition price -- and unless waiting to sell would result in more attractive long-term capital gains tax treatment -- I continue to believe that investors would be wise to take their profits and put them to work in another promising stock.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Itron, Inc. Stock Quote
Itron, Inc.
ITRI
$47.40 (-0.10%) $0.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
323%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.