Marvell Technology agreed to acquire optical component maker Lumentum, and its own shares fell on the news — a move the Motley Fool described simply as the market hating the deal. Normally an acquisition target's stock rises on deal news, since shareholders are typically offered some premium to the prior price. Lumentum's advisors did not see it that way this time.
Mizuho lowered its stock price target on Lumentum specifically because of the Marvell acquisition, according to Investing.com. That is an unusual sequence: cutting a target on the company being bought, rather than raising it toward the deal price, suggests the market or the bank itself is skeptical the announced terms hold up, or that the deal carries execution risk that outweighs whatever premium is on offer.
Taken together, the two moves point the same direction. Marvell's stock drop signals the market doesn't like the economics of doing the deal, and Mizuho's target cut on the target company signals doubt is seeping into Lumentum's valuation too, not just the acquirer's. Neither wire item spells out the exact deal terms or the size of either move, so the mechanism connecting falling acquirer shares to a cut target on the acquired company remains something the market will have to resolve as more detail emerges.
What isn't yet clear is whether this is a temporary overreaction to deal headlines or a genuine repricing of the optical components business Lumentum operates in.