The stock market's turbulence in January has been gut-wrenching, and investors came into the new week hoping that Friday's substantial bounce might mark the beginning of a calmer period for stocks. Unfortunately, that doesn't appear to be the case, with premarket trading suggesting a further move downward for major market benchmarks. As of 8:15 a.m. ET, futures on the Dow Jones Industrial Average (^DJI -0.22%) were down 207 points to 34,388. S&P 500 (^GSPC -0.06%) futures had dropped 19 points to 4,404, and Nasdaq Composite (^IXIC 0.31%) futures had fallen 4 points to 14,429.
Companies are struggling to compete effectively under tough conditions in many industries, and that has inspired many of them to consider strategic moves that have a big impact on investors. Unfortunately, not every decision companies make gets a warm reception from shareholders. On Monday morning, shares of BlackBerry (BB 1.54%) and Citrix Systems (CTXS) both fell in the wake of strategic moves the two companies appear to be pursuing. You'll find the details below.
BlackBerry sells its smartphone secrets
Shares of BlackBerry fell more than 5% on Monday morning. Shareholders reacted negatively to the company's decision to sell off some of the intellectual property that helped make it a pioneer in the mobile device revolution nearly 20 years ago.
BlackBerry announced that it had entered into a patent sale agreement with a specialty investment vehicle, Catapult IP Innovations, governing what it calls "non-core patent assets." Under the terms of the deal, BlackBerry will receive $450 million in upfront cash and a $150 million promissory note in exchange for turning over its mobile device, messaging, and wireless networking patents to Catapult. BlackBerry will also receive a license that will presumably allow the company to keep making use of the patented technology in its current lineup of products, services, and other business solutions. Payments under the note will come in $30 million installments for five years beginning on the third anniversary of the closing date of the deal.
The move is consistent with BlackBerry's transition toward focusing on its enterprise software business. In particular, its QNX embedded operating system for connected automobiles has become a popular choice for automakers seeking the latest in technological innovation, and BlackBerry hopes to take the capital from the patent sale to reinvest in that higher-growth business. As a result, BlackBerry doesn't look much like it did in its heyday in the early 2000s, and investors haven't seemed confident about the eventual results of its new strategy.
Citrix agrees to go private
Meanwhile, shares of Citrix Systems fell more than 3%. The cloud computing and virtualization technology company agreed to an acquisition that will result in its going private.
Citrix made a deal with Vista Equity Partners and Elliott Investment affiliate Evergreen Coast Capital that will involve its acquisition for $16.5 billion. Under the deal's terms, Citrix shareholders will receive $104 per share in cash for their stock. Following the acquisition, Citrix will get combined into TIBCO Software, a privately held data management company that Vista took private back in 2014.
Ordinarily, news of an acquisition results in a boost to the stock price, but investors have anticipated a buyout bid for Citrix for more than a month now. Vista and Elliott argue that their deal price represents a 30% premium to where shares traded in early December, but it's less than the price at which the stock traded as recently as September and far below its highs from mid-2020.
Acquisitions can be bittersweet, as they make it impossible for shareholders to participate in future growth. Vista and Elliott are being opportunistic with their purchase, and it'll be interesting to see whether Citrix comes back to the markets through a future initial public offering somewhere down the road.