Why TiVo Stock Popped -- and Xperi Stock Dropped -- Today

What happened

TiVo (NASDAQ: TIVO) is merging with IP licensor Xperi (NASDAQ: XPER).

The two companies announced their union this morning, and investors are having mixed reactions -- specifically, TiVo shareholders like the news, and TiVo stock is up 7.1% as of 10:10 a.m. EST, while Xperi shareholders don't -- and its stock is down 9.7%.  

Cartoon image of handshake

Image source: Getty Images.

So what

So what do we know about the merger? Here goes:

Logistically speaking, the merger will be effected by shareholders of both companies trading in their existing shares in TiVo and Xperi, respectively, in exchange for shares of the new company (which will still be called "Xperi"). TiVo shareholders will receive 0.455 shares of the new company per TiVo share traded in; Xperi shareholders will trade in at a 1-to-1 ratio.

The companies are describing this deal as "$3 billion" in size, factoring in the market capitalizations, cash reserves, and debt owed by both companies combined. Once it's finalized, the resulting company will have annual revenues of about $1.09 billion and "more than $250 million in operating cash flow on a pro forma basis for the twelve months ended September 30, 2019."

Now what

As for why the companies are merging, they explain that together, they will form "an intellectual property licensing platform" comprising "two highly complementary companies." Together, the new and improved Xperi will hold "more than 10,000 patents and applications," making it "one of the largest licensing companies in the world."

Regulators permitting, this deal should close sometime in the second quarter of 2020.

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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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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