Please ensure Javascript is enabled for purposes of website accessibility

Why Maxar Stock Jumped 8% on Monday

By Rich Smith – Updated May 13, 2019 at 4:04PM

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

Is the Canadian space company moving to prevent a takeover?

What happened

Shares of Canadian space star Maxar Technologies (MAXR 9.88%) are taking off (again) today, up 8% as of 3:08 p.m. EDT on a report that the money-losing company has found a way to literally turn its losses into an asset.

As detailed in a press release today, Maxar "has adopted a tax benefit preservation plan to help preserve the value of its net operating losses and other tax attributes," so that these can be used to reduce its tax bills on any profits it earns in the future.

Pirate walking a businessman off the plank

Image source: Getty Images.

So what

As the company explains, Maxar has accumulated "U.S. federal net operating loss carryforwards and federal R&D tax credit carryforwards [of] approximately $890 million and $77 million, respectively." But "the value of these tax benefits would be substantially limited if Maxar were to experience an 'ownership change'" -- such as by anyone acquiring more than a 50% ownership of the company's shares.

To prevent this from happening, Maxar says it's issuing preferred-stock purchase rights to its shareholders that will entitle them to buy stock in the event of a takeover attempt. It would thus dilute the would-be acquirers' ownership of Maxar and avoid both a chance of control and a loss of the tax credits.

Now what

That's what Maxar says. If you ask me, though, this sounds an awful lot like a poison pill that Maxar is implementing, one that will make it hard for another space company to acquire Maxar at its current, depressed valuation. As such, I suspect the real purpose of Maxar's move is not, in fact, to preserve net operating losses as much as it is to preserve management's jobs -- and deny investors a chance to earn a fat profit in the event of a takeover bid.

If I'm right, then the investors buying Maxar stock hand over fist today are making exactly the wrong move.

Rich Smith 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

Maxar Technologies Stock Quote
Maxar Technologies
$21.80 (9.88%) $1.96

*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 10/04/2022.

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.