Space stock Maxar Technologies (MAXR) had a banner day on Monday, surging in early trading and closing 10.4% higher for the day -- apparently on no news at all.
So...why did it do that?
I've searched high and low, and there seems to be no clear explanation. No analyst upgrades. No price target hikes. No new NASA contracts. Nor any positive press releases from the company itself today, that might explain Maxar's sudden popularity.
Except that...its popularity isn't really all that sudden. Fact is, Maxar Technologies shares have risen steadily over each of the last three trading days. Or, to put it another way, ever since the company announced that it's completed its previously announced "sale and leaseback" of its Palo Alto real estate, generating $291 million in gross proceeds -- and that it intends to use these proceeds entirely to pay down its debts.
That's a positive development for Maxar, to be sure. Still, $3.4 billion of its nearly $4 billion enterprise value is made up of debt. Even if Maxar got to keep all $291 million from its real estate sale (a certain percentage will certainly be eaten up by transaction fees), and apply it to its debt, that wouldn't cover even a tenth of its outstanding obligations.
What Maxar really needs to do at this point is get its free cash flow machine back in order, and begin generating cash it can use to tackle its mounting debts. Problem is, according to analysts polled by S&P Global Market Intelligence, Maxar was FCF-negative last year, is expected to remain so this year -- and will burn even more cash next year.
Unless there's some other news floating around out there to explain today's rally, the sudden 10% rise in Maxar's stock price might be a good excuse for investors to sell out of this stock, and wait to reenter after the company gets its cash engine fixed.