Cisco Systems Acquires Splunk in Deal Worth $28 Billion
By:Mike Butler
Cisco Systems (CSCO) agreed to acquire Splunk (SPLK) for a cool $28 billion in a cash deal, as reported Thursday.
The deal puts Cisco in a great spot, as both companies complement each other in the cloud-computing AI world that drives society today. With Cisco being a software company that allows users to reimagine technological infrastructure and application use, and Splunk being an infrastructure and application security company, the merger would allow companies of all sizes benefit from uncovering and analyzing data in a secure way, while staying ahead of the AI-transformation that's happening every day.
Cisco stock is taking a hit after the news, which isn't uncommon with mergers that are so costly. The deal is said to be a cashflow positive deal from the start, so the hiccup in the stock price may not be all that hefty over time. If Cisco can manage to harness the power of Splunk's systems to bolster security, stability and accessibility, that makes its product suite that much sweeter to companies of all sizes.
Splunk stock is seeing a big move to the upside as you might imagine, given the fact that the stock closed at $119.59 on Sept. 20. The stock shot up and opened at $144.48 on Sept. 21 as the news was released and has hovered around that same level ever since. What's interesting is that the deal is said to be for $28 billion with a stock price around $157, but we're still pretty far off that level currently.
Looking deeper into the April 2024 options cycle, we can see that there is a strong amount of certainty that the deal will go through, given the lack of extrinsic value premium at prices below the $145 level, as highlighted by the salmon-colored rectangle.
On the upside, we can see that there is still some uncertainty around the exact sales price, as there is still plenty of extrinsic value up to the $157 level where the deal is said to be projected at.
As we get more closure on the deal, it's always interesting to see how the options market prices it in —if the deal were set in stone, you wouldn't see any extrinsic value around the stock price in further-dated options cycles. The fact that we are seeing extrinsic value premium tells us that it's not a done deal just yet.
If the deal goes through, it will be interesting to hear what Cisco has to say on their next quarterly earnings call, which is projected to be mid-November 2023.
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.