Online real estate marketplace CoStar Group (NASDAQ: CSGP) has agreed to buy Matterport (NASDAQ: MTTR) for a significant premium to the target's Friday close. Investors are rallying into Matterport shares, sending the stock up 180% as of 1 p.m. Monday.
Bringing 3D data to a leading real estate platform
Matterport is a spatial data company focused on providing 3D floor plans and the cameras and other technology needed to create them for the real estate, construction, and hospitality industries. The company went public in July 2021 and the stock quickly shot higher, but the shares closed Friday about 80% off of their all-time high.
CoStar, a real estate data platform, sees value in the company's tools. The company agreed to acquire Matterport for $1.6 billion in cash, stock, and assumed debt. Matterport holders would get $2.75 per share in cash and CoStar stock worth $2.75 as of Friday's close for each share held, a premium of about 216% from Friday's close.
"CoStar Group and Matterport have nearly identical mission statements of digitizing the world's real estate," CoStar CEO Andy Florance said in a statement. "I look forward to welcoming Matterport to the CoStar Group family and believe that we will be stronger together, in pursuit of our common mission."
Is Matterport stock a buy after CoStar's buyout offer?
Even after the jump Matterport shares still trade at a 10% discount to the buyout price, an indication investors are not certain the deal will get done at the price listed in the press release. There is some risk that the value falls should CoStar shares fall, since there is a stock component to the buyout, but terms of a deal set a collar on how much the buyout price can fall or climb due to fluctuations in CoStar's price.
The companies expect to close the deal in 2024, subject to approval from regulators and Matterport shareholders. For existing Matterport shareholders, the deal either offers a nice premium or would allow those who bought at a higher price to recoup some of what they had lost.
The only reason to buy in now is arbitrage, a risky form of investing most are better off avoiding. Current Matterport holders might consider selling into this strength, as a rival offer seems unlikely and odds are the stock would give up these gains should Matterport be forced to go it alone.
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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CoStar Group and Matterport. The Motley Fool has a disclosure policy.
