Send me real-time posts from this site at my email
Motley Fool

Why FireEye Stock Just Popped 8%

What happened

Despite an analyst downgrade, shares of FireEye (NASDAQ: FEYE) were surging strongly in afternoon trading on the Nasdaq Friday. As of 2 p.m. EST, the stock was up 7.6% -- mainly on news released Thursday that a Blackstone (NYSE: BX) fund had made a $400 million strategic investment in the cybersecurity company.

So what

At 4:01 p.m. EST Thursday, just after the close of trading, FireEye announced that Blackstone Tactical Opportunities is partnering with cybersecurity-focused investment firm ClearSky to buy $400 million worth of 4.5% Series A Convertible FireEye preferred stock. Those shares will be convertible into FireEye common stock at a conversion price of $18 per share (about 17% higher than the stock trades today).

This provision suggests that Blackstone anticipates strong growth in the share price in the near future. (If it's wrong, though, it will at least receive 4.5% interest on its investment, which is a whole lot more than it would get from sticking the money in a savings account).

Image source: Getty Images.

Now what

FireEye isn't wasting any time putting this cash infusion to use. In a simultaneous announcement, the company said it will be buying cybersecurity investigation automation company Respond Software for $186 million in cash and stock.

The market seems to like both pieces of news. Investors bid the shares up immediately in after-hours trading, and the stock has largely held onto those gains. Regardless, British financial giant Barclays cut its rating on FireEye stock to underweight Friday morning, warning that the company will need to make even more such acquisitions, and probably pay premium prices to secure them, as competition heats up in the cybersecurity sector.

In apparent disagreement with Blackstone's setting an $18 price for convertibility, Barclays has a $17 price target on FireEye stock.

10 stocks we like better than FireEye
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and FireEye wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

*Stock Advisor returns as of October 20, 2020

Rich Smith 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.


Popular posts

Welcome! Is it your First time here?

What are you looking for? Select your points of interest to improve your first-time experience:

Apply & Continue