Firefly was smart to pay most of the SciTec purchase price in shares — and got a great deal.
Firefly Aerospace (FLY 12.04%), the recent space stock IPO and one of only a handful of entities ever to have successfully landed on the moon, saw its stock price crumble Thursday, down 12.5% through 11:20 a.m. ET.
The craziest thing of all: It happened in response to positive news.
Image source: Getty Images.
Firefly gets bigger
Last month, if you recall, I told you about a big acquisition Firefly was working on to make itself not just a space stock but a defense stock as well. For $855 million — paid mostly in Firefly stock at an inflated valuation — Firefly would acquire defense contractor SciTec and its $164 million-a-year revenue stream in defense work.
This acquisition has now closed.
As Firefly announced last night, it has successfully completed its purchase of SciTec, turning Firefly into a “full-service hardware and software for our space and defense customers,” as CEO Jason Kim put it. In particular, the acquisition “advances Firefly’s defense capabilities for critical national security programs, including Golden Dome.”
Today’s Change
(-12.04%) $-2.71
Current Price
$19.79
Key Data Points
Market Cap
$3B
Day’s Range
$19.19 – $22.27
52wk Range
$19.19 – $73.80
Volume
1.5M
Avg Vol
2.2M
Gross Margin
0.00%
Dividend Yield
N/A
Is Firefly stock a sell?
So why are investors now selling Firefly stock on this by all appearances positive news? I honestly cannot say.
On the one hand, Firefly’s getting SciTec for a nice price — 5.2 times sales — a bit more than I myself usually want to pay for a space stock, but not egregiously so. And Firefly’s effective price — valuing the 11.1 million shares it’s paying at their current share price below $20, plus $300 million in cash — is closer to $520 million than $855 million, yielding a P/S ratio closer to 3.2 times.
That seems more than fair to me. Investors who are selling Firefly on yesterday’s news may be making a big mistake today.
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.