After a huge upward move last week, it's natural for Wall Street pros to come back from the weekend and take a bit of a pause to assess the current situation. The economy has thus far been more resilient than many had anticipated, but that still leaves unanswered questions about the future course of monetary policy from the Federal Reserve and the potential impact of inflation. As a result, major market benchmarks opened close to flat on Monday morning.
Within the market, though, there were some high-profile winners. Palo Alto Networks (PANW -2.65%) achieved a key milestone that has investors excited about what the immediate future will bring. However, the biggest gains went to a tiny company in the industrial space, Circor International (CIR). Below, you'll find out why Palo Alto got a nice bump and then learn more about what Circor is and why its stock soared Monday morning.
Palo Alto gets an invitation it can't refuse
Shares of Palo Alto Networks rose more than 4% early Monday morning. The cybersecurity specialist got a prestigious invitation that will open the door to millions of investors automatically buying its stock.
S&P Dow Jones Indices announced late Friday that Palo Alto will become a member of the S&P 500 (^GSPC -1.20%) index. The move will technically occur immediately before the start of trading on Tuesday, June 20, which is the day after the Juneteenth market holiday. Palo Alto will replace Dish Network (DISH), which is getting demoted to the S&P SmallCap 600 index.
The move comes as part of S&P Dow Jones Indices' quarterly rebalancing. The index manager attempts to ensure that all of its indexes have companies that are representative of the market capitalization range that they cover. Even before its latest move, Palo Alto stock had jumped more than 50% since the beginning of the year as it managed to keep its cybersecurity business strong even in the face of potential weakness in IT spending among its clients.
Getting added to the S&P 500 means that index fund investors will soon own a proportionate share of Palo Alto stock as part of their underlying fund holdings. That often provides a short-term boost to the share price, but many had already anticipated that Palo Alto could keep rising if things went as well as the company expects.
Circor to go private
However, the big stock winner on Monday morning was Circor International. Its stock soared nearly 50% as the flow control products specialist got an acquisition offer from a key player in the private equity industry.
Circor came to an agreement with investment funds led by KKR (KKR -1.83%) under which KKR will buy out Circor and take it private. Under the terms of the deal, Circor investors will receive $49 per share in cash for their stock.
For Circor, the acquisition marks the end of more than a year of efforts to try to unlock shareholder value, with the company having gone through an extensive strategic review. Circor had spoken to a number of parties that were interested in acquiring either the entire company or certain parts of its business. In the view of the company's board of directors, the KKR deal was the best in recognizing the true value of Circor.
KKR, meanwhile, will benefit from owning a critical business that serves industrial, aerospace, and defense customers. With mission-critical products that have national security implications, KKR hopes to reap long-term rewards for its own investors from the acquisition. With an acquisition bid at triple the price shares fetched just a year ago, many investors are quite happy with the move as well.
