What does potential takeover mean for Citrix's stock?

Citrix Systems [CTXS] is a Florida-based cloud computing company. It specializes in virtualization technology and offers a wide variety of products including virtual desktops, cloud-based collaboration services, and real-time performance analytics.


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Today its stock suddenly dropped by over 3% following reports of an impending takeover that will take the company private 


Why is Citrix stock going down?

News emerged today that Vista Equity Partners and Evergreen Coast Capital — an affiliate of Elliott Management Corp. —  are close to agreeing on a deal to purchase Citrix in a deal worth roughly $13 billion. The deal, which could be formally announced as soon as next week, will see the joint venture acquire the cloud-computing company for $104 per share. 

Considering the stock closed at $105.55 Friday, this deal could be seen as quite good value for the purchasers. However, if we look a little further back we can see that it actually represents quite a premium considering Citrix’s low valuation in early December of last year. Citrix’s price had been rising due to takeover rumors for the past month, and this deal seems to have generally underwhelmed investors.


Valuation of Vista Equity and Elliott Management's bid for Citrix



What does this mean for investors?

For current Citrix shareholders, the deal will see you receive $104 in cash per share owned. As for the company itself, it’s likely to be merged with data management company Tibco Software, which was purchased by Vista in 2014. The company will be delisted from the Nasdaq exchange once it is taken private, but this doesn’t rule out a potential return to being publicly traded further down the line.

It’s yet to be seen how this acquisition will affect Citrix long term. The company had been struggling to capitalize on the soaring demand for cloud services throughout the pandemic, and its attempts to transition to a subscription-based business have been largely unsuccessful. 

If this takeover can successfully migrate the company to one more agreeable with the shifting remote-working landscape we see today, there’s no reason why it can’t be successful in the future considering its already extensive software offerings.

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