$SPLK- Buy the rumor, Sell the news and more

Yesterday after hours CNBC and others reported that Cisco made a $20 Billion offer to buy Splunk ($SPLK): https://www.cnbc.com/2022/02/11/splunk-shares-spike-on-report-of-cisco-buyout-offer.html

As stated in the CNBC article, Splunk’s shares ran up in the after hours session. As of now, there are no other details if this acquisition will happen or not. If there’s no confirmation over the weekend or early Monday then Splunk may run up a bit more. A bidding war could be in the cards, too, driving Splunk’s price up even further. The article also noted that SPLK would be CSCO’s largest acquisition. CSCO is a highly acquisitive company and relies on buying companies as part of their growth strategy.

Seeking Alpha speculated a couple of years ago that Splunk could be an acquisition target by many of the top tier tech companies:


Many on of the potential acquirer’s mentioned in the Seeking Alpha article compete with Splunk. These type of competitive relationships are called “frenemies”. Each provider’s capabilities may overlap one another for the same application or use case so they’ll compete independently for the business. However, many times these same technologies will augment one another and create synergies so they’ll partner for opportunities.

Since Splunk appears to be in play then some of their competitors may also be potential acquisition targets and their price may appreciate:

Competitors and Alternatives to Splunk

  • Nagios.
  • Cisco.
  • Broadcom.
  • Microsoft.
  • SolarWinds.
  • ManageEngine.
  • SevOne.
  • Riverbed.

So there’s a few different ways to play this development:

  1. Long SPLK - buy the rumor, sell the news

  2. Long for any of the competitors as sympathy plays (note that CSCO is on the list and it’s unlikely it will have price appreciation)

  3. Short CSCO (the acquirer usually takes a dip on this kind of news)

There may be other angles to play here, too. Feel free to add thoughts, comments, critiques. Cheers!


It is interesting that SPLK is getting sold for $20B when its market cap was $19B already on Friday. Barely any premium to speak of.

This valuation is also lower than its pre-COVID market cap of $27B, a ~35%+ discount.

And let’s not mention the 52W high price of $176, from which this is a ~40% discount.

What a turnaround in how the market sees companies that manage to lose $1.3B on $2.5B in revenue. But makes sense - the era of free money is gone, and therefore so are the prospects of cheaply buying growth.

Which then suggests there might be another play to consider here - other tech outfits like SPLK that have a good product but that are hemorrhaging money are probably also shopping themselves to the tech giants who are flush with cash. Perhaps the constituents of the ARK* ETFs are a good place to start, as well as the floated unicorns in CYBR etc. Some are hopelessly loss-making, but there could be a set like SPLK who make for nice acquisition targets for bargain-hunting mega-tech.

The premium ATVI and SPLK got are measly though, unlike say CERN, so it is possible there isn’t much to be made here even if we did identify those acquisition targets.


Thanks for providing that analysis @The_Ni. Great points.

Another interesting aspect regarding the poor performance of SPLK is that their previous CEO resigned mid-November 2021: https://www.cnbc.com/2021/11/15/splunk-stock-plunges-as-ceo-doug-merritt-steps-down.html

He was under pressure because of SPLK’s underperformance for multiple quarters leading up to his ouster. They’ve struggled moving the platform to the cloud.

Currently there is not a full time CEO that has replaced the former CEO. The COB is at the helm for now.

Also, here is an article from a Motley Fool contributor that delves into why he likes Dynatrace ($DT) over SPLK: https://www.nasdaq.com/articles/why-im-selling-splunk-stock-and-buying-dynatrace-and-elastic-instead

I’ll be watching SPLK tomorrow for reaction to the CSCO news.


Apparently SPLK turned down the CSCO offer because it’s too low as reported by Briefing.com at 11:29 AM ET today (I’m unable to paste this news from my trading platform but it’s probably been disseminated to most other trading platforms).

There was a Business Insider article January 31, 2022 that reported SPLK was attractive because it was cheap: 11 Cloud Companies That Could Be Takeover Targets in 2022

Schaeffer Research reported recent bullish options activity prior to CSCO’s offer: Options Traders Target Splunk Stock After Buyout Offer

Based on the offer rejection, SPLK will look for better offers to materialize. IMO calls can be a good play. I’m looking at entering longer dated calls.

Another catalyst that may boost SPLK would be a new CEO announcement. A good CEO will extract more value - SPLK needs to turn their business around and execute on their platform cloud transition. They need to reign in expenses. A new CEO should address these items and drive greater value for investors.

I’ll add updates as developments unfold. Cheers!

Thus far, there haven’t been any updates from either SPLK or CSCO that a deal is forthcoming. CSCO’s CEO was asked during his earnings call if the deal would occur or not. He did not directly address that question.

I’ve read in Morningstar that SPLK investors should hold out for $28 Billion which translates to $175 per share (this pps is near the 52 week high):


That’s a bit rich compared to todays roughly $18.5 Billion valuation. Just a reminder, SPLK turned down the CSCO offer of “more than $20 billion” - the real amount was not disclosed.

Now for something completely different:
SPLK may benefit from ramped up cyber security spending due to the current Russia / Ukraine situation. It closed up 1.32% today. You might be able to trade it for this catalyst.

I’ll continue to monitor SPLK and provide relevant updates concerning buyout news and/or new CEO announcement. Cheers!

Quick update - earnings are AH today. It’s currently trading down at 114.21. Options are not high volume. I’m still long my 105c and will hold thru earnings. The play is still for a buyout or a new CEO announcement.

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