Shares of cloud computing company Hortonworks (NASDAQ:HDP) leapt in Thursday trading, closing the day up 12.7%. And to find out why, you need look no further than the company that Hortonworks is merging with, Cloudera.
Earlier today, Cloudera reported fiscal Q3 2018 financial results that beat analyst estimates for both sales and earnings, sending Cloudera 12.2% higher.
Why does that matter to Hortonworks shareholders, though? Because when Cloudera and Hortonworks worked out their "merger of equals" transaction in October, they structured it as a de facto buyout of Hortonworks by Cloudera. But rather than paying cash for Hortonworks shares, Cloudera elected to pay with Cloudera stock. Once this merger closes, therefore, owners of Hortonworks will each receive 1.305 newly issued shares of Cloudera common stock.
As a result, from now until the merger closes sometime in the first quarter of calendar year 2019, every time Cloudera stock goes up, you should expect to see Hortonworks stock go up by a similar amount. (And every time Cloudera goes down, Hortonworks should, too.)
The relationship won't be exactly 1-to-1 because there's still the potential for the merger to fall through, decoupling the two stocks. But the relationship between Cloudera stock price movements and movements at Hortonworks should be close enough for government work, as the saying goes.
They sure looked it today.