What happened

Shares of Okta (OKTA 0.45%) rallied on Wednesday, surging as much as 8.9%. As of 12:42 p.m. ET, the stock was still up 6.8%.

The major market indexes were decidedly higher, which no doubt provided tailwinds for the identity verification and cybersecurity specialist. While there was no company-specific news driving Okta higher, the catalyst was likely the news that a rival was being taken private at a hefty premium.

So what

Ping Identity Holding (PING) revealed today that it was being acquired by technology-centric private equity firm Thoma Bravo. The acquisition will be an all-cash deal that values Ping Identity at $2.8 billion. Assuming the deal is approved, shareholders will be paid $28.50 per share, which represents a hefty 63% premium compared with the stock's closing price on Tuesday. 

The deal will ultimately require the approval of both shareholders and regulators, but barring unforeseen roadblocks, the acquisition is expected to close later this year.

Now what

Okta is one of many high-growth technology stocks that have been hobbled by the bear market, with shares currently down roughly 62% compared with highs reached late last year. The falling stock price aside, Okta's opportunity in its space remains vast.

The company generated revenue of $1.3 billion in fiscal 2022 (ended Jan. 21), but that's a drop in the bucket compared with its total addressable market, which management estimates at $80 billion. 

Furthermore, the digital transformation is ongoing, as businesses continue to join the cloud revolution. Providing identity verification and access management solutions is more important than ever. Okta is the leader in the industry, according to Gartner, who rated it tops in its high-profile Magic Quadrant. Forrester Research came to a similar conclusion, naming Okta the leading identity-as-a-service provider for enterprise. 

The hefty buyout premium for Ping Identity only serves to validate the value of Okta's services and the breadth of its opportunity.