What happened
Shares of Tufin Software Technologies (TUFN) were up 43% as of 12:03 p.m. ET on Wednesday. The stock price jumped on news that Turn/River Capital is buying the Israel-based software company for $13 per share in an all-cash transaction.
So what
Tufin provides enterprise software that helps companies monitor their network of devices and cloud infrastructure for security vulnerabilities. The business saw improving revenue in 2021 compared to 2020. Tufin ended the year with revenue increasing 16% year over year. The company signed its most significant deal in three years, but the stock has underperformed. Enter Turn/River.
It's an investment firm that specializes in software companies. While shareholders might wish for Tufin to remain independent to realize more gains from future growth, management believes this deal will help accomplish its long-term goals faster.
Image source: Getty Images.
Now what
"We believe Turn/River Capital is the ideal partner for Tufin as the company makes further progress to a subscription-based revenue model," lead independent director Tom Schodorf said. Management said it is looking forward to working with Turn/River to accelerate expansion into new markets and reach new customers.
The acquisition offer includes a 30-day period to allow Tufin to solicit better offers from third parties, but this is usually customary. The transaction is expected to close in the second quarter.
With the stock trading close to the $13 buyout offer, shareholders should think about selling, since there's not much profit to be had once the deal is completed. There are plenty of other small cap stocks to explore that could be undervalued in this market environment.
