Why the Telit share price is surging 15% today

The Telit share price has soared on this news, capping a brilliant few months for the IoT and 5G product maker. Tom Rodgers explains what happened.

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The Telit Communications (LSE:TCM) share price has soared more than 15% after a takeover offer from Swiss chipmaker u-blox.  

The Internet of Things (IoT) product maker announced that it was considering the bid in a 20 November market update. The Telit share price is now trading at levels not seen since August 2017.

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The £260m market cap firm is one of the 100 largest on London’s AIM market.

Telit share price leaps ahead

u-blox is worth £383m and makes wireless semiconductor chips for the consumer and automotive market. It is traded on Switzerland’s SIX stock exchange. 

Successful takeovers can represent a big payday to investors, which is one reason why the Telit share price is now trading at a three-year high. 

Under the terms of the all-share buyout bid, Telit shareholders would receive u-blox shares at a value of 250p per share. As of mid-morning on 20 November, the Telit share price sat around 195p, some 28% below the offer price. 

The group has received approaches before, of course. The u-blox bid is only the most recent takeover attempt. Earlier this month, the Telit board said it rejected an offer from the £94m market cap NASDAQ-listed IoT producer Lantronix.

Telit all

Elsewhere, business appears brisk at the Italian-Israeli firm.

In a 10 November trading update, Telit said its sales remained “resilient” compared to the first half of the year. IoT cloud revenues jumped 10% to $32.4m. It said this news backed the group’s strategy to focus on industrial IoT services. 

In January, Telit started expanding its range of 5G products to address the growing demand for high-bandwidth devices. 

And the Telit share price has rebounded strongly from the depths of the March 2020 Covid-19-induced stock market crash. Since then, the Telit share price has forged up from an 83p low, adding 126% to reach nearly 200p.

Taking over

The board confirmed takeover rumours on 3 November, lighting a fire under the Telit share price. And speculation grew as to the potential identity of the takeover applicant. So confirmation from CEO Paulo Dal Pino that u-blox has a firm offer in place appears to be the reason for today’s Telit share price jump.  

It’s quite the turnaround for the London-listed IoT maker. In 2017, Telit won a purchase order to supply parts to Tesla’s Model 3 cars, sending shares flying. Tesla, of course saw its own 20% share price jump this month after it gained entry to the prestigious S&P 500

But scandal hit. Telit’s shares crashed over 50% in a week in August 2017 after former boss Oozi Cats revealed he was wanted for a 25-year-old fraud case in Boston. Finance boss Yosi Fait replaced the disgraced CEO then issued a market warning to say that full-year profits and sales would be below expectations.

Green shoots

A new management team arrived in 2018 to turn the company around. Paulo Dal Pino’s focus has been on refocusing the group and growing revenues and profits. So his confirmation of takeover rumours on 3 November, the positive trading update a week later, and today’s announcement of a bid from u-blox have all contributed to the rapid Telit share price rise. 

The massive expansion of the 5G and IoT sectors have also done no harm at all to Telit and confidence appears high over the future direction of the company. 

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TomRodgers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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