Please ensure Javascript is enabled for purposes of website accessibility

Why Pareteum Corp. Stock Plunged Today

By Steve Symington – Nov 13, 2018 at 3:20PM

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 cloud software platform provider just unveiled an all-stock acquisition. Here's what investors need to know.

What happened

Shares of Pareteum Corp. (TEUM -50.00%) fell as much as 15.8% early Tuesday then settled to close down 7.9% after the cloud software platform company announced an all-stock agreement to acquire mobile connectivity and location data specialist iPass (NASDAQ: IPAS).

More specifically, iPass shareholders will receive 1.17 shares of Pareteum common stock for every share of iPass they own, valuing iPass at just over $21 million as of yesterday's close. iPass, for its part, closed up 18.1% today.

Woman drawing two yellow fish on a large wall, with the larger fish eating the smaller one.


So what

Of course, today's pullback for Pareteum -- caused by the dilutive nature of the acquisition -- predictably dampens that value for iPass investors. But the companies stressed the positive aspects of their impending combination.

Pareteum president Denis McCarthy stated:

Pareteum has enjoyed a solid partnership with iPass over the past year and our mutual view on connectivity and mobile enablement made it easy to see that we could grow our business and accelerate our mission together. Our integration with iPass extends not only Pareteum's customer base, but also our portfolio of services. Customers will now be able to use the Pareteum Global Software Defined Cloud to access premium wireless and Wi-Fi services, and experience location data analytics for a truly immersive experience.

Now what

The merger is not subject to the approval of iPass stockholders. But assuming all goes as planned with the necessary regulatory approvals and the tender of a majority of outstanding iPass shares, it should close in the first quarter of 2019. After that, Pareteum expects the purchase will add roughly $5.5 million of adjusted (non-GAAP) earnings in the first full year while providing annual cost synergies of more than $15 million. In the meantime, investors should expect iPass stock to remain tethered to the share-price movements of Pareteum.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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

Pareteum Stock Quote
$0.00 (-50.00%) $0.00

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/25/2022.

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.