Marvell Technology falls as Lumentum deal concerns persist

Marvell Technology stock dropped 5.6% in morning trading on Wednesday to $162.28, continuing a decline that began after the company announced a $115 billion all-stock acquisition of optical components maker Lumentum Holdings.

The deal would give Lumentum shareholders 4.5 Marvell shares for each share they own, representing about a 24% premium. Investors expressed concern about the all-stock structure, which would dilute existing shareholders, and questioned the price paid for the transaction.

Multiple analysts downgraded the stock and reduced their price targets following the announcement. TD Cowen lowered its rating to Hold from Buy and cut its price target to $175 from $350. Sean O'Loughlin, analyst at TD Cowen, said the downgrade was driven "primarily by our negative view of the transaction itself in terms of structure and timing, rather than the quality of the asset Marvell is acquiring."

Bank of America moved its rating to Neutral from Buy and reduced its target to $225 from $400. The firm's analyst pointed to a potential extended stock overhang and expressed surprise at the timing of the deal.

B. Riley, RBC Capital, Wells Fargo, and Cantor Fitzgerald also lowered their price targets, though most kept positive long-term ratings.

On Sunday, the same day the deal was announced, Marvell's COO sold 10,000 shares.

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