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Why Shares of GTT Communications Skyrocketed Today

By Chris Neiger – Oct 16, 2020 at 12:32PM

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Investors are happy the company is selling some of its assets.

What happened

GTT Communications (GTT) stock spiked today after the company said it had reached a deal to sell its infrastructure division to I Squared Capital. Shares of the technology company jumped by as much as 31% on the news this morning but were up by 8.5% as of 11:38 a.m. EDT. 

So what 

GTT Communications said in a press release that the company is selling its infrastructure division, which consists of its "Pan-European, North American, sub-sea and trans-Atlantic fiber network and data center infrastructure services" for $2.15 billion. 

A white arrow on top of of a blue bar chart.

Image source: Getty Images.

GTT's interim CEO, Ernie Ortega, said the sale will help the company focus on cloud networking. "The deal enables GTT to reinforce its capex light business model as well as its cloud networking focus and will benefit both enterprise and infrastructure clients alike," he said in the company release. 

GTT will receive $2.02 billion in upfront cash at closing, with total deferred payments of up to $130 million. The deal is expected to close in the first half of 2021.

Now what 

Investors were clearly happy to see that GTT is moving away from its infrastructure business to focus more on cloud networking, but it doesn't mean that the company's share price will stabilize any time soon. GTT Communications' stock is down 52% year to date and the huge share price spike and subsequent pullback this morning prove just how volatile this stock is right now.

Chris Neiger 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.

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