Investors Sell The News Of IBM-Cloudera Rumor

IBM IBM and Cloudera Inc CLDR last week announced a partnership, but on Tuesday a rumor surfaced that IBM is interested in acquiring the data engineering company.

What Happened

IBM and Cloudera's partnership will see the companies develop joint go-to-market programs to combine advanced data and artificial intelligence solutions. On Tuesday morning, Dealreporter said the companies may be looking to expand the partnership with IBM acquiring Cloudera.

The report sent Cloudera's shares spiking higher by more than 5% just after Tuesday's open and hit an intraday high of $5.79. By 11:00 a.m. ET, shares gave up all gains.

Cloudera's stock traded at $5.52 per share at time of publication, down 0.27%.

Why It's Important

The reaction to Dealreporter's speculation may indicate investors aren't convinced a merger is likely to materialize. Typically speaking, a credible rumor of a pending M&A deal results in the stock remaining higher for the day -- or at the very least not dipping into the red.

Cloudera's name has been mentioned before as a potential M&A target. In reaction to IBM's acquisition of Red Hat, DA Davidson's Rishi Jaluria said Cloudera would satisfy the "continued appetite for open-source software companies at scale," CNBC reported.

Wedbush's Daniel Ives said in early June a hypothetical strategic buyer could be interested in buying Cloudera's properties as its combined assets (with Hortonworks) could be worth $9 to $11 per share.

Related Links:

IBM, Cloudera Announce Strategic Partnership

The Street Reacts To Cloudera's Earnings, Concerning Guidance