STOCKS | Lumentum Shares Fall 10% as Marvell Bid Faces Skepticism and Rival Offers Loom

Lumentum shares fell 10% on Wednesday to $610, about $100 below the per-share value of Marvell’s all-stock offer, as investors weighed the proposal and the possibility of rival bids. According to Sina Finance, the offer valued Lumentum at about $80 billion as of Tuesday; after Marvell shares fell 32% since news of the deal leaked a week earlier, the implied value had declined from $115 billion to $78 billion, then to about $71 billion following Wednesday’s selloff. Marvell would need to issue about 50% more shares to complete the acquisition, one reason Wall Street analysts are skeptical. Lumentum makes optical components, including lasers used to transmit data within and between data centers. UBS semiconductor and networking analyst David Vogt said the shift from copper to optical and photonic technologies as Nvidia GPUs get faster over the next decade would benefit optical equipment makers. Analysts forecast Lumentum revenue growth of 122% in the fiscal year ending next June. They expect Coherent to grow 50% over the same period and Applied Optoelectronics to grow more than 100% over the next few years. Lumentum’s gross margin is close to 50%, and its forward revenue multiple was eight times at Tuesday’s close, compared with three to four times for the other two companies, according to S&P Global Market Intelligence. Potential rival bidders include AMD and Intel, while Nvidia is seen as less likely after investing $2 billion each in Marvell and Lumentum and securing product purchase agreements with both. Tirias Research co-founder and analyst Jim McGregor said acquiring Lumentum could help Marvell compete with Broadcom for major technology customers. He also cited Lumentum’s distinctive laser products, including lasers it supplies to Coherent. A cash-and-stock rival offer could attract Lumentum shareholders and prompt Marvell to revise its all-stock proposal.